Sirius XM's Guidance News is Substantial

In a bit of good news Thursday, Sirius XM (SIRI) radio has adjusted their guidance on their EBITDA loss from ($300,000,000) to an EBITDA lost of ($200,000,000). This is $100,000,000 better than first outlined by the company, and would seem to indicate that merger synergies and cost controls are having a positive impact. An adjustment such as this is substantial, particularly during these economic times.

One substantial move that until now has not really been quantified is the savings generated by the changes in the channel lineup. The company estimates that they will save $35,000,000 annually, and while passionate fans of each service have been vocal, there were less than 10,000 cancellations due to the channel line-up shift.

Sirius XM noted that prior to the changes, the company had total production of 130 music channels. The channel changes brought that number down to 67 channels. As things stand now, SIRIUS and XM both feature 69 commercial-free music channels, 63 of which are shared.

For 2009, the company expects $425,000,000 in merger synergies. For the first time, the street can now get a sense of where the company is seeing cost savings. This should help analysts build better models for 2009 and forward. Synergies will be derived from areas such as:

• Satellite & Transmission: $20 mm
• Programming: $60 mm
• Customer Service & Billing: $20 mm
• SAC: $50 mm
• Sales & Marketing: $150 mm
• General & Administrative: $50 mm
• Research & Development: $25 mm
• Revenue Synergies: $40 mm
• Capital Expenditures: $10 mm

These positive pieces of news still do not solve the 2009 debt issue. The company states that they are working with JP Morgan and Evercore in three key areas including operational improvements, existing debt holder discussions, and new investor discussions. The company has a goal of completing all by March 1, 2009.

Position - Long Sirius XM

Comments

[marcopolode...:]

I am confident in this company. I am buying more shares, I am in for the lung run. Long SIRI

2008 Dec 19 08:23 AM

[bananaz:]

Mel doesn't disappoint. I am wondering how much price dilution by swapping newly authorized stock for debt is factored into the stock price right now?

2008 Dec 19 09:09 AM

[Edster:]

Good news for Sirius for a change. Good luck to all holders and may the news reflect in increase in the stock price in 2009. Wishing a happy New Year to all holders who have waited so long for good news. This holder is confident that CEO Mel and his administration team will make the merged satelite an eventual success hopefully with much progress in 2009.

2008 Dec 19 09:41 AM

[tech man:]

i am sticking to the plan. bad news is galore all over, i, for one am hanging in there. have 2 many shares not to. i am in this for the long haul. hoping for the best. i have a good feeling about 09. satallite is to important to dismiss. mel, has something going on. he has to much pride in this to let it fail. tyler, thanks for the good reporting and as always right on the money. thanks for the facts and not the personal opinions as we get from so many others. i am for the long haul as you apparently are. thanks my friend. hang in there everyone it is going to get better. t.m.

2008 Dec 19 08:10 PM

[I'm Not Jim...:]

Marco: the long run will last maybe to the end of 09, but certainly not to end of 10. Gone private, bought out, or bk by then.

2008 Dec 20 12:55 AM

[I'm Not Jim...:]

bannaz: Oh, I don't know. I'm just a little disappointed in a 70% decline in value! lol

2008 Dec 20 12:57 AM

[I'm Not Jim...:]

tech: You forgot; he makes everyone around him play better, and he's a gamer, and oh yeah, he'giving it 110%!

2008 Dec 20 12:59 AM

[BIGMarv:]

As far as Sirius, it sucks, I have 20,000 shares and look to lose all of my investment. I bought as a long-shot very-speculative stock purchase. Oh well it wont be the frist time I had a stock that went under, LOL

2008 Dec 20 08:36 AM

[31October:]

Re: Marco Polo and "I am in for the lung run."
Me, too -- I gasp for air every time I see the stock price.

Re: Big Marv and "correctional institution."
It is good to have long-term perpective on investments. 10 years after trusty work credits is a good time horizon.

Mr. Savery: Just joking. Don't shank me.
[Unless they go bk; then it would be a mercy.]

2008 Dec 22 02:08 PM