Positioning Sirius for an Eventual Economic Turnaround

One headline Thursday was that JP Morgan Chase (JPM) posted a better than expected profit. Another was that housing starts are not as good as expected. The economy is not yet recovered, but at least now there are sparks of good news that seem to give people hope that things will get better. The question is how soon?

Sirius XM Radio (SIRI) has a core group of loyal subscribers who have seen the value in the service, and simply will not give it up. It is these subscribers who will build the foundation of the success of the satellite radio business model. Yes, a tough economy makes it difficult to bring new subscribers in the door, but the loyal group of those that simply can not be without the service will continue to grow.

Across many business sectors, the gears of the economy seem to be trying to start again. Things in motion tend to stay in motion. Things at rest seem to stay at rest. There was a period not too long ago that everything ground to a halt. Getting real movement again will be a process. In my business I have seen projects that went on hold a month ago seeing new signs of life now. The scope of those projects has been scaled down, but what everyone seems to recognize is that sitting still was not a solution.

For Sirius XM Radio, the current plan has to be continued synergy savings, scaling back, and maintaining a level of service that keeps the core happy. As the economy gains steam, so will Sirius XM Radio. The company is in a careful balance that requires a level of cautiousness. That being said, there are several inexpensive things, such as Twitter and Facebook, that the company should embrace. The company should give serious consideration to expanding their online presence, and creating a social network that allows people that are not yet subscribers to experience the product. Three of the top 10 downloads on Blackberry App World are free music services (Slacker, Pandora, and Clear Channel’s IheartRadio). Sirius XM needs to gain this type of exposure now in order to best benefit from an economic turnaround.

When the time comes that car sales improve, bad mortgages are flushed out of the system, and people have a bit more confidence, a service such as Sirius XM will benefit - especially if they lay the foundation now. The company is on the cusp of getting out an application for the iPhone (albeit later than many had hoped for). The company has the potential to combine merger synergies with Liberty Media (LINTA) synergies. Sure there will be some bad news. Investors should not hold out high hope on the subscriber numbers for Q1, but then again, it would appear that we have graduated from that type of thinking. As long as the important metrics such as cash flow, ARPU and SAC are in line or better than expected, the company should be able to deliver shareholder value.

The turnaround of the economy will take time, and investors may not see immediate satisfaction, but it appears that Sirius XM has the potential to be in a good position to respond to better times ahead.

Position: Long Sirius XM

Comments

[Ishortyou:]

the open market model is chewing them up!

Apr 17 07:46 AM

[tech man:]

Thanks mr short for the info. however, the shorting days are about over for you guys. siri is on the way up. to much good news is out there. siri-xm is here to stay. fundmentals are getting better all the time. so enjoy while you can. the days are coming to an eeeeend. t.m.

Apr 17 09:23 AM

[User 396722:]

Hey Tyler: Good news today! By the way, is there a good picture of you available?

Apr 17 11:14 AM

[connorport:]

Shorts will always be here but the question is...Will they make money shorting SIRI? Not today! If i were a short i would move back to the banks and wait for that bubble to burst again. Massive debt conversion and RS are in line for many that put their hands in the TARP cookie jar. GM looks like a good short as well. How many shares do they have to issue to convert $27.5 billion in debt and will they carry 15 billion outstanding shares? Probably not. They will convert and RS and long investors will lose in these stocks. SIRI on the other hand has not exceeded its assets in debt and is holding steady in a horrific financial environment. That says a lot.


On Apr 17 09:23 AM tech man wrote:

> Thanks mr short for the info. however, the shorting days are about
> over for you guys. siri is on the way up. to much good news is out
> there. siri-xm is here to stay. fundmentals are getting better all
> the time. so enjoy while you can. the days are coming to an eeeeend.
> t.m.

Apr 17 12:13 PM

[pmac:]

The loyal Sirius subscribers are loyal due to the Howard Stern channel. No long term analysis can neglect the fact that Stern's contract is up in little more than a year and if he were to retire as he has said he may on the air many times the company would be near bankruptcy again with very little hope this time of a reserrection.

Apr 17 12:25 PM

[bartlanz:]

I am looking forward to them doing really well. I am a lifetime subscriber to sirius, and have had them for years at this point (but just bought the lifetime in december). Also as a holder of their stock from three different stock buys (100x2.39, 700x0.11, 2200x0.06) I am looking forward to strong future growth so my service which i love so much can continue, and of course personal gain on my part... I dream of days when that stock has soard to unreasonalbe levels... :-D

Bart

Apr 17 12:52 PM

[matty3000:]

and with the money freed up by Stern leaving, whats going to happen? You don't think they can find new talent?


On Apr 17 12:25 PM pmac wrote:

> The loyal Sirius subscribers are loyal due to the Howard Stern channel.
> No long term analysis can neglect the fact that Stern's contract
> is up in little more than a year and if he were to retire as he has
> said he may on the air many times the company would be near bankruptcy
> again with very little hope this time of a reserrection.

Apr 17 12:54 PM

[bartlanz:]

Also, I do not like howard stern, I havnt listend to him since i was in 7th or 8th grade. which is many many years ago now. There are lots of other things that draw people to sirus, I travel alot, the comdy chanels are awsome when you are in traffice! People look at me like i have 3 heads as i am in bumper to bumper traffice lmao!

Apr 17 12:54 PM

[Ron the Rocket:]

Pmac...your just flat wrong. It seems by your comment that you are not a subscriber. If you were, you would understand the power of SiriusXM...the loyalty of the shareholders comes from their pure satisfaction with the product. I switched from XM to Sirius when Howard started...i had never had access to Howard on a daily basis. To be honest, he's way past his prime...pretty boring usually...not that great a show. However, i would never leave SXM because of the amazing music with no commercials and the ability to listen to news, talk, sports at a much higher quality level and less commercials than regular junk FM.

If Howard leaves, I assure you the cancellations will be minimal. And it would be a great money move considering what we wouldn't have to pay his ass on a yearly basis. He's way overrated...way, way overrated.

Cheers from KC...


On Apr 17 12:25 PM pmac wrote:

> The loyal Sirius subscribers are loyal due to the Howard Stern channel.
> No long term analysis can neglect the fact that Stern's contract
> is up in little more than a year and if he were to retire as he has
> said he may on the air many times the company would be near bankruptcy
> again with very little hope this time of a reserrection.

Apr 17 01:18 PM

[connorport:]

OUCH!!!!! This might sting a little!!!


On Apr 17 07:46 AM Ishortyou wrote:

> the open market model is chewing them up!

Apr 17 01:45 PM

[connorport:]

Impressive volume on the up side. Should be some positive news in the next few days. Someone knows something.

Apr 17 02:08 PM

[between the...:]

Shorts, would you like some fries with your A$$ that is being handed to you?

Apr 17 02:37 PM

[connorport:]

Like i said. Wait till .75 then jump on for a small bump down. i sure hope you're not in. Today the shorts can now now how SIRI shareholders felt a few months ago and we can see how you felt. Feels nice. .53 and going!!!


On Apr 17 07:46 AM Ishortyou wrote:

> the open market model is chewing them up!

Apr 17 02:44 PM

[connorport:]

KNOW!! KNOW HOW!! Im too excited to spell right.


On Apr 17 02:44 PM connorport wrote:

> Like i said. Wait till .75 then jump on for a small bump down.
> i sure hope you're not in. Today the shorts can now now how SIRI
> shareholders felt a few months ago and we can see how you felt.
> Feels nice. .53 and going!!!

Apr 17 02:45 PM

[connorport:]

KNOW!! KNOW HOW!! Im too excited to spell right.


On Apr 17 02:44 PM connorport wrote:

> Like i said. Wait till .75 then jump on for a small bump down.
> i sure hope you're not in. Today the shorts can now now how SIRI
> shareholders felt a few months ago and we can see how you felt.
> Feels nice. .53 and going!!!

Apr 17 02:45 PM

[hernje:]

Very well said.


On Apr 17 01:18 PM Ron the Rocket wrote:

> Pmac...your just flat wrong. It seems by your comment that you are
> not a subscriber. If you were, you would understand the power of
> SiriusXM...the loyalty of the shareholders comes from their pure
> satisfaction with the product. I switched from XM to Sirius when
> Howard started...i had never had access to Howard on a daily basis.
> To be honest, he's way past his prime...pretty boring usually...not
> that great a show. However, i would never leave SXM because of the
> amazing music with no commercials and the ability to listen to news,
> talk, sports at a much higher quality level and less commercials
> than regular junk FM.
>
> If Howard leaves, I assure you the cancellations will be minimal.
> And it would be a great money move considering what we wouldn't have
> to pay his ass on a yearly basis. He's way overrated...way, way overrated.
>
>
> Cheers from KC...

Apr 17 04:20 PM

[wholesalecd:]

Tyler, your skin looks terrible in that Picture. Get an updated one that show's better skin tone.

Apr 17 06:27 PM

[wholesalecd:]

This is still a failed business model. I would short at these levels. Don't buy now for you will lose in the future. Short, short, and short again until the stock is all washed up and company is left out to dry.

Apr 17 06:30 PM

[tech man:]

have to difffer with you wholesalecd, you are a shorter, i can tell, it is a great business model, the future is very bright for siri, so much that i purchased 1000 more shares yesterday. better do your research, instead of speaking out of your rear end. we are fixin to go places with siri-xm, just you wait and see Mr. better move on to another short this one is about to dry up. so sorry big guy. t.m.

Apr 17 07:01 PM

[HardwoodFlo...:]

As a consumer- I have Sirius in my car and it's great. Love channel 32. Bloomberg is great. It's a good prodcut Sirius. I hope they survive. Again this is just as a consumer. The stock has been a bleeping mess.

Apr 18 11:33 PM