Sirius XM: Apple? Google? What?

May.17.13 | About: Sirius XM (SIRI)

Recently, I read a two part series discussing what Seeking Alpha contributor StockSaints thinks may possibly happen in the future. Namely, a bidding war between Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) to buy out Sirius XM (NASDAQ:SIRI) from shareholders and majority owner Liberty Media (NASDAQ:LMCA). The series can be found in these two links and uses the following titles:

These articles have caused a slew of questions, comments, and various postings which seem to be spreading and gathering a bit of steam suggesting Apple and Google are now in or will soon be in a bidding war offering $4.50+ for Sirius XM. Consider the following question posed to me just this evening :

Click to enlarge

I've spoken with the author, StockSaints, before, and while I think he writes well and has some very interesting ideas, I think these articles are being taken wrong by readers and that has the potential to be problematic. Let's stop this before it gets out of hand.

First and foremost, the premise of the articles is simply an idea from the author. Consider the following quotes taken from them:

As impressive as this is for any paid subscription service, Apple is more impressed with the company's free cash flow growth, which surged 846% year over year.

While Pandora's growth is outperforming Sirius, Pandora's ability to generate cash is not as attractive to Apple. The advertising model is not a platform that Apple, which values the user experience, wants to be in.

They paint the picture that Apple "is" impressed with Sirius XM and Pandora "is not" as attractive to Apple. But unfortunately I can't find anywhere that Apple, or anyone at Apple, has stated that it is impressed with Sirius XM or that Pandora is not as attractive to Apple. I wasn't even aware and can not find evidence that Apple is eyeing either company for an acquisition. But the way it is written makes it sound like Apple "is."

Apple should make a bid for Sirius.

It's something that some seem to be missing here. This is key. The author is merely saying that he believes Apple "should" be interested in and make a bid for Sirius XM.

But here again, unlike both Pandora and iTunes, Sirius, by virtue of its premium offering is the standard.

To that end, Apple should make a bid for Sirius.

I like Sirius' long-term prospects. But in my opinion, so does Apple.

As one reads the entire article, the author is pretty clear that this is simply an idea and they support their theory extremely well, but investors need to understand that this is just an idea and has absolutely no support (that I am aware of) from statements by Apple.

On to the second article, the title is misleading:

Sirius XM: Google And Apple Fight For Its Rights

As Google and Apple are not in a fight for Sirius XM at all. A more appropriate title would be: Sirius XM: Will Google And Apple Fight For Its Rights?

And I feel that simple title is causing a great deal of confusion. But again, within the article the author is quite clear:

Meanwhile, Sirius XM's surge on Wednesday, which produced almost three-times its daily volume, brought about more speculation, including when will the fight begin to see who will put out the cash to acquire its assets. On Monday, I made a case for why Apple will step to the table and possibly offer $4.50 per share.

Speculation, folks. This is not something which has happened or that Apple or Google has even hinted at. There is no bidding war, and while I don't disagree with the idea that there is a 'possibility' of a bidding war, I think that such a possibility is rather remote.

I'll be honest. The two part article series by StockSaints is not where my mind typically wanders, but it got me thinking and for that I am rather appreciative. There was one bit that stood out to me, though, and matches up with some of my opinions for the future:

Do you remember last year, when Google signed its content-sharing deal with Sirius? This is now the beginning of what has been Google's friendship with the dominant name not only in the premium radio business, but in the automobile. Spotify and Pandora can't compete there. Sirius, which has roughly 20 million paying subscribers, should be looked upon as a gold-standard

I think if there's a "key" here to the future, it's in a partnership or cooperation and not a buyout. Malone? Liberty Media? I don't think either will be so quick to toss out Sirius XM, and I think $4.50 would be laughed at.

Everyone should take a step back and re-read the two articles above by StockSaints, and just remember as you do that these are well explained ideas and speculation by the author. Try not to get too excited, though. Rumors of buyouts and grand ideas of bidding wars do little for investors, and can actually hurt those who jump on the rumor only to have the share price drop once the Street realizes that the rumor has no official backing from the companies within it.

Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long SIRI January 2014 $2 and $2.50 calls.