RD's Picks

SIRI - launching money into orbit

SIRI just issued an annual report, so there's some fairly current financial data - and it doesn't look promising to me.

The balance sheet is, um, ugly.

Long-term debt stands at about $1.3 billion. That's a lot of interest headwind to fight when you're trying to make it to profitability. For 2007, the loss from operations was $513 million and net loss was $565 million. Book value is negative.

Current liabilities are about $1 billion, current assets are about $680 million. Uhh-oh - someone's going to be tapping the credit line and adding to that debt to pay the bills.

About the only good news is that subscribers and revenues have been increasing rapidly. But so has the cost of revenue. To have any hope, they need to keep subscriber revenues climbing and get cost of revenue under control. As some other posters have mentioned, I'd be very concerned with maintaining subscriber growth in a slowing economy. A satellite radio subscription just isn't going to be a high priority if people have to tighten budgets for higher gas bills, groceries, higher taxes, etc. Between XMSR and SIRI, there are something like 17 or 18 million subscribers. Probably a fair amount of subscriber growth left, but just how many people are going to pay for satellite radio when they can get broadcast for free?

But, what if the deal gets approved. XMSR to the rescue right? Not so fast. Over the last four quarters XMSR has only had a little over 10% revenue growth; losses have been shrinking but analysts are still estimating losses. Their balance sheet is in pretty much the same shape as SIRI's.

So, if you own SIRI and the deal goes through, you'll end up with stock in XMSR. And two companies with lots of debt, the same basic business model and plenty of losses for the foreseeable future become one bigger company with the same characteristics. Then you get to hope they can hang on until subscriber revenue growth outstrips costs.

It looks like both of these companies will need to continue taping credit lines to raise the cash to keep going. Before buying the stock, ask yourself - In today's credit market, would you lend either company money?

Maybe it spikes up if there's good news on the merger or something. If you want to gamble, fine. But if you're looking for investments, there are better alternatives covered in blogs here every day.

Comments: View Comments | Saturday March 1, 2008

Archive Comments (7)

they have 17 or 18 million subscribers? really? what a joke. how could you not have a profitable business with that many millions of subcribers. what are all these 'costs'? its streaming radio. their margins should be off the charts. current liabilities are about 1 billion?! my goodness. sounds like they really did themselves in with the infighting a few years ago with the half-billion dollar contracts to harpo and drawoh.
if they wan't to stay in business, why don't they just eliminate their costs? tell winny and stern to renegotiate, or they risk losing everything. file for bankruptcy. do something to survive. maybe withdrawl the deal op and let xmsr file bankruptcy later on, then buy it without the obligations, sending a message to siri's own anchorweight. who own's their satellites? hawk em off for test-firing (no, just kidding). are they renting? if not, reposition one over europe or china. are'nt there ride-along-piggy-back applications for gov/ed/tel/trans/vid

Posted by d l March 1, 2008 10:57 AM

i do not know if anybody is doing the math but 18,000,000 subscriptions at 12.95 per month is equal to 2,797,200,000.00 now that is nearly 2.8 BILLION $$$$$ per year,, how can they possibly not be solvent??????????????????????????????

Posted by southrngent1 March 4, 2008 11:49 PM

I own some shares of SIRI- should I keep them.

Posted by pwalesky March 5, 2008 2:55 PM

Woo hoo, comments.

d l, Great questions, but I haven't got many answers. I think they own their satellites, but they're financed - suspect that's much of the debt.

southrngent1 - the subscriber total is XMSR and SIRI combined, not just SIRI. But, the revenues don't cover costs. Big interest expense and they have to pay for all that programming. Like d l noted, harpo and drawoh have big $$$ contracts.

pwalesky - the blog is just my opinion of the stock, I'm not in a position to try and give investment advice, sorry.

Posted by Russell Krull March 5, 2008 10:46 PM

Nice post and analysis. My guess is Winnie and Stern will be on internet radio within a few number of years to make sure they are being heard. /sings "Skylab, Skylab..."

Posted by Uncle John March 6, 2008 4:33 AM

Not that I am suggesting anything, but where can you short a stock like siri if it is under $5.00?

Posted by Bruce810 March 7, 2008 7:36 PM

Russ,
Congratulations - you have attracted the "IRE" of D. L. & she won't even 'Stoop' to recognize that I even EXist !!!

WoW - What an Accomplishment .....

I'm a little RETRO, however, I still can't figure out TelStar ( by The Tornados ) :
http://youtube.com/watch?v=u2ybCjf6ras

OR The Ventures ( imitators, mostly ) :
http://youtube.com/watch?v=eabt9qJjanE

SIRI-US-ly - Sirius is Dead Money if I ever saw it. No Way, Jose. Not even w/ Howard Stern's Potty Mouth & Drunken " Little People" or the Young Women who 'Strip' bare - as it is not that ExCiting on RADIO !!!!!! Not So ????

Don L. Ferk ( fka VikingWarrior )

Speaking of "Launching into Orbit "
Song O'da Day -

Mr. SpaceMan
The Byrds - featuring Roger McGuinn
http://youtube.com/watch?v=e5Q8-ARJwb0

http://youtube.com/watch?v=e5Q8-ARJwb0

&
http://youtube.com/watch?v=bs2NNUCDzis&feature=related

http://youtube.com/watch?v=bs2NNUCDzis&feature=related

Don L. Ferk ( fka VikingWarrior )

Posted by don ferk March 15, 2008 8:55 PM

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