Worldspace: Will The Last One To Leave Please Turn Out The Lights? (WRSP)

Mar.23.06 | About: Worldspace Corporation (WRSP)

Worldspace Inc. (WRSP) is viewed by its fans as the Sirius Satellite Radio (SIRI) or XM Satellite Radio Holdings Inc. (XMSR) of countries like India. The company claims its satellite radio footprint reaches two-thirds of the globe. USB analyst Lucas Binder put a "buy" recommendation on the stock recently, indicating that the company's 48% price decline in the last week was not justified since the company is adding subscribers.

Unfortunately, there is no way to get around the fact that things at Worldspace look really bad. At the end of the year, the company had 115,000 subscribers. Sirius has four million and still loses a lot of money. In Q4 2005, Worldspace only had $4.4 million in revenue. Loss from operations for the period was almost $63 million. If you back out $15 million for stock-based compensation and $17 million for depreciation and amortization, it is not quite as bad.

The company raised $221 million in an IPO in August 2005. The company traded at $26 early on, but has dropped to $6.25, and has hardly had an "up" trading day along the way. The current market cap at $235 million is barely more than the company raised.

Even with non-cash expenses backed out, the cost to run Worldspace based on Q4 number is about $140 million per annum.

That means revenues have to grow 35x to cover costs.

I don't think so.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also the president of when it was the 10th most visited site in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has, in the past, been on the boards of and Edgar Online.