Sirius XM Needs a Growth Plan

I have mixed emotions on Sirius XM's (SIRI) first quarter call. Although long term I remain bullish on the company, the near term I'm afraid leaves me less enthusiastic. The longer term positives arising from the report are stellar, while the shorter term negatives border on abysmal.

The company's balance sheet has never looked so good. Revenues are up and costs are down. That is nothing short of amazing given the drop in new car sales. By now there have been dozens of articles written describing in detail just how good Sirius XM has improved its financials, so I'll spare you another.

Overlooked by many, is that Sirius XM for the first time provided separate subscriber numbers for self paid and promotional subs. I had written about this very topic just several weeks ago. In fact, it was the very first article published on my new website.

Subscriptions in paid promotional trials in Q1 2008 were approximately 3.6 million and peaked at 3.7 million in the second quarter of 2008. With the dramatic decline in North American auto sales, paid promotional trials have dropped to 3.2 million at the end of the first quarter of 2009.

Since Q1 2008, on the other hand, our self-pay subscriber base has grown from 14.3 million to 15.4 million. We hope this additional detail provides greater insight to investors about trends in our underlying business, which continues to perform well despite auto industry woes.

This one factor will make it easier for Wall Street analysts to gauge the company's true growth in the future. Another positive for Sirius XM is that it raised its EBITDA outlook for the year from 300 to 350 million. No doubt the added revenue, however, will come from the renegotiated General Motors (GM) contract, which will provide substantial long term benefits to the company.

The greatest negative, in fact, that I took from the call, would be the company's lack of providing a growth plan. With no new OEMs to spur growth, the company seems too content in my opinion, to ride out the lull in auto sales in hopes of a second half recovery. As a salesperson, I find this troubling.

The recently merged company has been "recently merged" for 7 months now. Cost cutting and balance sheet improvements are justified, but should not continue to be the sole plan for growth. The company seems to have gone from a marketing machine to a subscriber retention machine. It just won't work, as witnessed by the fall-off in first quarter net subscribers.

Position: Long SIRI

Comments

[Rich K.:]

It's like Poltergeist or something. The sell off triggered my stop loss. In at .05 so I am not complaining. Thing is, it is stuck at my stop leaving the door open for me to come back.

The only thing to save Siri at this point is Disney! Disney can take over and hey, make Mel play "Cruella Du Ville," at Disney World, Land and Europe. Disney is slowly but surely taking over the world. They say they are planting trees in people's honor, secretly they are robots. Waiting for the signal from the satellites.

gasp... the satellites...

Up side potential? This would also help world economies and third world countries. With Disney in charge of the sats, they could hook up with direct tv and have disney in the back seat.

Take over GM and Crysler and make the Pluto Scooto or something. A hybridid that runs off of equilibrium. TV's in the back seat with cartoons galore. If you want, you can have disney movies play while you are driving with audio only. Books on tape even after they buy Apple.

They could go in with Buffet (Buffett, spelled both ways on wiki. That's stupid Rich.) and Gates for ridiculous cash on hand. The stock would start out at 2 billion dollars with 89k dividends quartely. (Like to meet someone who could short that.)

With the right amount of people in a pool, some people might start colonies on Pluto... Disney owned...

With all of that,

I might be interested in this stock again.

Maybe not all of it.

I will just go take my schizo pills and think of what would have happened if I were playing with VNDA instead of Siri.... my photo would be my bank account.

I think I need two pills...

May 08 03:56 AM

[Rich K.:]

Give me an italian suit, a set of clubs with a -3 avg and a deep tan, I'll run the company. I will even take 10% less than Howard Stern.

How can you launch a sat with bills to pay?

pills kicking in...

May 08 03:59 AM

[Stan Muse_:]

Why doesn't SIRI have a marketing deal with Harley Davidson (HOG) like they do with the car companies? Harley's business is doing great.
They should also look at the other motorcycle manufacturers.

May 08 08:54 AM

[jmsithy:]

Here is something to look at www.proxyvote.com/0119...

May 08 08:57 AM

[jmsithy:]

Because it is a safety hazard with that distraction in your ear


On May 08 08:54 AM Stan Muse wrote:

> Why doesn't SIRI have a marketing deal with Harley Davidson (seekingalpha.com/symbo...)
> like they do with the car companies? Harley's business is doing great.
>
> They should also look at the other motorcycle manufacturers.

May 08 09:09 AM

[Randall Pin...:]

They need a growth plan, new management, more stockholders that give a crap, quality programming, quality radios, a realistic strategy, and more money.

That's all??????
SELL SELL SELL SELL

siri to .25 by next week, sell while you can still turn a profit.

May 08 09:19 AM

[Neal Barkett:]

Brandon, you hit the nail on the head! I'm with you a 100% that it seems they are waiting out the car sales slump. Why not be proactive and be clear on a plan that shows that the company is expanding their market so not to rely so strongly on the auto industry. I'm hoping Mel is focused on this but lack of communication on this matter makes me very concerned about his mindset. Lack of innovation & marketing seems so real that it's getting to a point that is it a time for Mel to step aside? I hope I'm wrong but throw us a bone!

May 08 09:20 AM

[connorport:]

I think in June we see the IPhone app released and record downloads the first day. Many may be waiting for this application. Some of the lost Subs in my opinion i think are more of a family cost trimming as with most businesses today. A lot of Subs have multiple accts so if they are going to trim their own costs then they may deactivate one or two of those subs leaving the other active. The good side of this would be a massive reactivation of these accts when everyone feel warm and fuzzy again with the economy.

May 08 09:21 AM

[connorport:]

They seem to be making strides in entering the Internet Radio market as well as teaming to make apps for Blackberry and IPhone. The only problem here is they don't advertise. Now enter Liberty Media with its multimillion Sub base themselves. They need a massive add campaign at these people who do pay for content such as DTV. These are the people who SIRI needs to target short term. I wouldn't sell someone an IPod and then ask their friend if they want to buy some IPod accessories if they didn't have an IPod. Free content would also bring an influx of Subs. I think millions would purchase premium equipment for the free service. With terrestrial radio now facing royalties and what will be less content then they already have their advertiser base will dwindle and someone will pick it up. Lets hope SIRI has a plan for this.


On May 08 09:20 AM Neal Barkett wrote:

> Brandon, you hit the nail on the head! I'm with you a 100% that it
> seems they are waiting out the car sales slump. Why not be proactive
> and be clear on a plan that shows that the company is expanding their
> market so not to rely so strongly on the auto industry. I'm hoping
> Mel is focused on this but lack of communication on this matter makes
> me very concerned about his mindset. Lack of innovation & marketing
> seems so real that it's getting to a point that is it a time for
> Mel to step aside? I hope I'm wrong but throw us a bone!

May 08 09:43 AM

[wcorowitz:]

I agree, Iphone should have been released on thurs. to offset some of the bad news. They could have at least talked about it in detail. Also they should have talked about how reworking the GM deal will save the company money. Also they should never sign another big name contract for globs of money. Even if someone brings in millions of listeners, it only translates to x number of dollars. People pay for superior music content with no commercials. This is the lifeblood of their business. More communication!!!

May 08 11:22 AM

[Buffetphan:]

Common case of people dumping after a hope in astronomical numbers at the end of quarter. If this company still survives @ .05 what makes you think it will die? Regardless of the loss in subscribers this quarter and dwindling auto market SIRI was still able to turn a profit and with a reduced cost to maintain operations profit will only continue to grow as well as cash flow which is really the deciding factor upon which a stock is judged. Let all the cowards sell now when things aren't looking good pretty much of a monkey see monkey do type of act.
.

May 08 02:38 PM

[Igorsky:]

SIRI has a growth plan. Here are two possible good reasons they keep it to themselves for now..

First, they are working on it and/or are under negotiations (re: iPod/iPhone apps). A good negotiator does not hype his potential benefits before the agreement is sealed.

Second, in SIR's business where there are lots of competition, it is best not to show their hand long before they can deliver their 'new' product or services. Getting a long head start with the competition is always good practice for getting a good chunk of the market before competition can adjust. This is the lesson iPod / iPhone has shown us. I am hoping SIRI will accomplish the same.

I do not thing MEL is a one dimension manager. He has eliminated his direct competition through merger (XM) and he has avoided BK. Now he is concentrating in growing the business. He already has an agreement with Toyota, Honda, Nissan and KIA/Hyundai should not be far behind if he has not already. As the economy improves, more truckers will be adding SIRI radios in their cabs. Remember how in the 60's, CB's were the rage among truckers? He could very well be exploring adding the audio portion of some of Malone's direct TV shows to his programming.

May 08 08:01 PM

[peshu:]

Mel Karmazin, listen to me... Make a package bundle to the subscriberr

Buy Direct TV, and get Sirius XM package free... market yourself you one dimension CEO

May 08 09:47 PM

[wholesalecd:]

Those who wait get left behind. This company is TOO PASSIVE for the product/service it offers.

SELL MONDAY AT .35 AND GET BACK IN AT .25 - .30.

JAY BOY BILLY


On May 08 09:20 AM Neal Barkett wrote:

> Brandon, you hit the nail on the head! I'm with you a 100% that it
> seems they are waiting out the car sales slump. Why not be proactive
> and be clear on a plan that shows that the company is expanding their
> market so not to rely so strongly on the auto industry. I'm hoping
> Mel is focused on this but lack of communication on this matter makes
> me very concerned about his mindset. Lack of innovation & marketing
> seems so real that it's getting to a point that is it a time for
> Mel to step aside? I hope I'm wrong but throw us a bone!

May 08 11:53 PM

[wholesalecd:]

SIRIUS WAS STILL ABLE TO TURN A PROFIT????????

OH, AND THE ONLY REASON THEY "DIDN'T" GO BK AT .05 WAS THE INVESTMENT BY LIBERTY MUTUAL. OTHERWISE, THEY WOULD HAVE BIT THE DUST.

Sell Monday at .35 then buy back later in week at .25.
This stock will probably trickle down to .25 - .30 before it starts moving positive again.

JAY BOY BILLY


On May 08 02:38 PM Buffetphan wrote:

> Common case of people dumping after a hope in astronomical numbers
> at the end of quarter. If this company still survives @ .05 what
> makes you think it will die? Regardless of the loss in subscribers
> this quarter and dwindling auto market SIRI was still able to turn
> a profit and with a reduced cost to maintain operations profit will
> only continue to grow as well as cash flow which is really the deciding
> factor upon which a stock is judged. Let all the cowards sell now
> when things aren't looking good pretty much of a monkey see monkey
> do type of act.
> .

May 08 11:58 PM

[wholesalecd:]

No! Growth Plan would benefit this company if it were out in public. What do they have to hide from ANYONE. They are the ONLY SatRad in business and the only ones with Satellites in space for this type of service. They don't have to give too many specifics, just some type of marketing plan.

JAY BOY BILLY


On May 08 08:01 PM Igorsky wrote:

> SIRI has a growth plan. Here are two possible good reasons they keep
> it to themselves for now..
>
> First, they are working on it and/or are under negotiations (re:
> iPod/iPhone apps). A good negotiator does not hype his potential
> benefits before the agreement is sealed.
>
> Second, in SIR's business where there are lots of competition, it
> is best not to show their hand long before they can deliver their
> 'new' product or services. Getting a long head start with the competition
> is always good practice for getting a good chunk of the market before
> competition can adjust. This is the lesson iPod / iPhone has shown
> us. I am hoping SIRI will accomplish the same.
>
> I do not thing MEL is a one dimension manager. He has eliminated
> his direct competition through merger (seekingalpha.com/symbo...)
> and he has avoided BK. Now he is concentrating in growing the business.
> He already has an agreement with Toyota, Honda, Nissan and KIA/Hyundai
> should not be far behind if he has not already. As the economy improves,
> more truckers will be adding SIRI radios in their cabs. Remember
> how in the 60's, CB's were the rage among truckers? He could very
> well be exploring adding the audio portion of some of Malone's direct
> TV shows to his programming.
>

May 09 12:03 AM

[wholesalecd:]

June???? What makes you say June?

And record downloads the first day???? What???Why???

Well we will see but all that's a LONG SHOT.

Sell what you have MONDAY. If you all remember I posted on Wednesday to SELL because the numbers were gonna be bad. Those of you that listened I commend you. Those that didn't i.e Connerport. You can still sell Monday before you lose much more.

JAY BOY BILLY




On May 08 09:21 AM connorport wrote:

> I think in June we see the IPhone app released and record downloads
> the first day. Many may be waiting for this application. Some of
> the lost Subs in my opinion i think are more of a family cost trimming
> as with most businesses today. A lot of Subs have multiple accts
> so if they are going to trim their own costs then they may deactivate
> one or two of those subs leaving the other active. The good side
> of this would be a massive reactivation of these accts when everyone
> feel warm and fuzzy again with the economy.

May 09 12:08 AM

[wholesalecd:]

How about the common case of people buying into the PUMP UP only to get DUMPED????

That is more of a correct scenareo.

TWO LOSING COMPANIES MERGED = BIGGER LOSER

JAY BOY BILLY


On May 08 02:38 PM Buffetphan wrote:

> Common case of people dumping after a hope in astronomical numbers
> at the end of quarter. If this company still survives @ .05 what
> makes you think it will die? Regardless of the loss in subscribers
> this quarter and dwindling auto market SIRI was still able to turn
> a profit and with a reduced cost to maintain operations profit will
> only continue to grow as well as cash flow which is really the deciding
> factor upon which a stock is judged. Let all the cowards sell now
> when things aren't looking good pretty much of a monkey see monkey
> do type of act.
> .

May 09 12:42 PM

[doctorex:]

101 me on the nature of the one-time charge of 7 cents per share that knocked the 1q earnings, supposedly, from minus 1 cent to minus eight cents. is somebody making this up, or what? doctorex

May 10 10:23 AM

[Buffetphan:]

Yes a profit read the conference call I dont feel like looking through it to show you. Thanks for the recap I think all siri investors know what happended with the liberty mutual deal.. and why do you think they would have a interest in SIRI?? and for your other comment below thanks for saying exactly what I said just in another way. Why are we buying back the stock when it drops to .25 if you feel so negatively about SIRI. maybe its because your a short selling whore.


On May 08 11:58 PM wholesalecd wrote:

> SIRIUS WAS STILL ABLE TO TURN A PROFIT????????
>
> OH, AND THE ONLY REASON THEY "DIDN'T" GO BK AT .05 WAS THE INVESTMENT
> BY LIBERTY MUTUAL. OTHERWISE, THEY WOULD HAVE BIT THE DUST.
>
> Sell Monday at .35 then buy back later in week at .25.
> This stock will probably trickle down to .25 - .30 before it starts
> moving positive again.
>
> JAY BOY BILLY

May 10 02:38 PM