Sirius: Post-Merger Guidance
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Despite finally getting some merger guidance for satellite radio, the stocks responded by giving up virtually all gains acquired late in the day Friday. Sirius (SIRI) and XM (XMSR) gave the first real glimpses of synergies in a press release issued Monday morning. The new guidance includes:
Expects 2009 Total Net Synergies of $400 Million
Expects 2009 Adjusted EBITDA of $300 Million
Expects Positive Free Cash Flow, before Satellite Capital Expenditures, for 2009
Sirius was clear that the synergies outlined assume that the proposed merger with XM passes regulatory muster. The DOJ approved the deal some time ago, and a Draft Order has been circulated by FCC Chairman Kevin Martin. While the new details did not get very specific, the company did offer a bit of added flavor:
– Total synergies, net of the costs to achieve such synergies, for the combined company are expected to be approximately $400 million in 2009;
– Adjusted EBITDA for the combined company is expected to be approximately $300 million in 2009. Adjusted EBITDA is net income/(loss) before interest and investment income, interest expense (net of amounts capitalized), depreciation expense, and non-cash stock compensation expense; and
– The combined company is expected to achieve positive free cash flow, before satellite capital expenditures, for the full year 2009.
“The upside potential from this merger is significant. In addition, the synergies, adjusted EBITDA and free cash flow are expected to continue to grow in subsequent years, and we look forward to providing more detail of this growth in coming months,” said Mel Karmazin, SIRIUS Chief Executive Officer and the previously announced CEO of the combined SIRIUS and XM.
While the new information is welcomed news, the pending merger is what people are really interested in. This new guidance should give analysts some new items to consider as they begin to draw up their models.
Disclosure: Long Sirius, Long XM
This article has 102 comments:
WHAT WILL WEINKES DO?
of Value
of Value
of Value
I have sought to position myself as the healthy voice of dissent, and encourage them to examine these companies more critically before committing funds.
Teh Vicar has news: There will be no FCC decision for weeks, if not months. The political winds are simply not in this company's favor, if you connect the dots and do your math. In the meantime, these companies will continue to hemorrhage money - and your investment.
Warren Buffet does not own the stocks of these risky companies. If they're not good enough for him, why are they good enough for you?
I was glad to see Mel come out with something today to try and give some guidance during this FCC delay. I still think my thinking about a decision before the open meeting is on track. Also good to see that there wasn't much panic selling and the stock holding at 1.90. I was a bit concerned early morning but the price held. I think your comment, as well as others, that quick money and fatigued investors washed out last week proved true.
of Value
I did call Tate and voiced, how the time they have spent on this was ridiculous. Her asst. told me that there was alot to go over. I then said well first of all you have had 16 months to do that. Then said that the DOJ who had the more difficult job and had as much if not more to go over and was able to do it 3 months ago. I then went on to say that this extra delay is boardering on incompetence. That I would have expected more out of a fellow republican. She then asked what state I lived in for her spread sheet to show who is for and against and what state they are from. Her # is for those that want or dont know it is (202) 418-2500.
On Jun 30 06:07 PM The Vicar of Value wrote:
> Shure, you sound very undiversified. With these companies' heavy
> debt levels, and cost structures, are you sure you want to bet the
> farm? I'm not.
Pay him no heed; he is harmless.
of Value
Just keep in mind that these are heavily leveraged, unprofitable companies with limited operating histories and substantial potential for shareholder dilution. Their upside is limited, and downside is zero.
Speculative positions in measured quantities can add some flair to any portfolio, depending on your risk tolerance. I'm quite skeptical about these companies' stocks. I disagree with you that buzz trumps fundamentals. I acknowledge that the market can be inefficient at times, but cash and profits inevitably support a stock's value. Thanks for rising above the bitterness and negativity that permeates this board at times.
of Value
(from allaccess.com, an industry publication) 6/30/08
______________________...
Even though FCC approval of the SIRIUS and XM merger appears quite likely, terrestrial radio forces are still calling on Congressional reinforcements to throw a monkey wrench in the works. The latest salvo is a letter from Senators JOHN KERRY, CLAIRE McCASKILL and BEN CARDIN have sent a letter to FCC Chairman KEVIN MARTIN demanding that more channels be set aside for minority interests, and that it be a requirement that HD equipment are installed in satellite radio receivers.
The demands are hardly minimal. Under the current proposal, the merged satcasters would donate 12 channels (of roughly 4%) of its 300-channel capacity to minority interests, with 12 more channels going to non-comm and educational programming. The Senators demand: anywhere from 20% (around 60 channels) to 50% of satcaster programming capacity.
Another major concession would be the in requirements that all satellite radio devices also be integrated with HD Radio receivers. The reason: It's an "essential check against the merged entity using its monopolistic power to stifle a promising, free, over-the-air radio technology."
One need to be a soothsayer to expect the satcasters to strenuously object to the first two demands; no doubt they would consider such proposals an effort to sabotage the merger, if not the entire satellite radio business.
of Value
On Jul 01 09:38 AM The Vicar of Value wrote:
> Thanks for your positive feedback, Shure. I'm certain you'll be fine.
>
>
> Just keep in mind that these are heavily leveraged, unprofitable
> companies with limited operating histories and substantial potential
> for shareholder dilution. Their upside is limited, and downside is
> zero.
>
> Speculative positions in measured quantities can add some flair to
> any portfolio, depending on your risk tolerance. I'm quite skeptical
> about these companies' stocks. I disagree with you that buzz trumps
> fundamentals. I acknowledge that the market can be inefficient at
> times, but cash and profits inevitably support a stock's value. Thanks
> for rising above the bitterness and negativity that permeates this
> board at times.
of Value
All the focus appears to be on Commissioner Tate. Looks like this is wear the final decision will be made.
of Value
seekingalpha.com/artic...
Yes I did, I read almost everything that comes out in the sectors I am in. What did I think about it. Well first of all, it is almost all speculation. something he is trying to say we should not be doing. I will not get into the cell phone sector that he uses because for those that want, can find I already posted on how much faster satellite radio is being adopted then cell was. As to is there a limit to the top to the subscriber base, I dont disagree. but that can be said for most sectors of business. Kellogs is only going to sell so many boxes of cereal. If they want to increase their revenew then they expand out in to other types of cereal or breakfast bars, or buy another company or start a new one. To say that satellite radio is dead because that is all they will have is satellite radio is ridiculous. So like him I will speculate. First the easy one and most obvious SIRI of Canada has just started to pick up and for those that think that is a totally seperate company think again, because SIRI not only has a big % of the company. Who do you think SIRI of Canada depends on for most of its content and all its satellites, which mind you, they have to pay whatever SIRI tells them they have to pay within some reason. Then there is the rest of the world, DTV is already going after the Asian market. Then there always is the data compresion technology who knows, by the time internet radio gets all the bugs, troubles worked out, satellite radio may turn into satellite radio/tv, and not just for cars. Is that enough speculation for you VicDave, because I can go on and on and on. Does it make any of it real, NO. But then neather is his arguement when it is base solely on speculation with a few minor facts tossed in.
By the way, I may not read his articles anymore, when he has no place to put comments to rebut his conclusions, in a place like Seeking Alpha that always usually does. That smacks of a person that cannot stand to have his article debated/ torn apart. The reason I see is clear.
On Jul 01 05:48 PM The Vicar of Value wrote:
> If you haven't taken a moment to read Mike Stathis's latest excellent
> piece on the risks inherent in this space, I strongly encourage you
> to do so:
>
> seekingalpha.com/artic...
of Value
Just read the headlines: GM sales fell 19 percent, Ford was down 28 percent and Toyota dropped 21 percent in June over the same period a year ago.
Starbucks is shuttering 600 stores over declining sales.
Who buys satellite radio subscriptions, gentlemen? The same people who buy new cars and frappuccinos.
The writing is on the wall, folks. If these stocks outperform the market, it will be through luck and circumstance, and not through any insightful epiphany on your part.
My hunch is that even if the stocks pop, you won't sell. You'll ride it all the way back down because you'll be consumed by the illusion that they're headed higher.
That will be the inevitable consequence of not being to identify, articulate, and justify your sell price. Pity the E-Traders out there, they're all the same. I'm glad they don't manage my portfolios.
Your disappointment will be palpable if the FCC approves (unlikely now before September) and the stocks don't move much.
There is more downside coming. Are you sure that of all the publicly traded companies and mutual funds accessible to you, that these unprofitable satellite radio companies are really going to give you the best possible return for the level of risk you're assuming?
I am sorry VicDave but sometimes you make yourself, to easy of a target. If you want to put satellite radio down there are easyer things. Like how some if not most OEM deals are to costly. How they paid to much for the content. Those are valid points that can be argued. I would say to both, is that while they have made mistakes they are in the process of correcting those mistakes, or that it was what was needed to be done other wise there would not be the growth they have had. But to say the finanials are bad in a start up company (especially one that is using a new technology) is ridiculous, because they are bad in every start up company.
On Jul 01 05:48 PM The Vicar of Value wrote:
> If you haven't taken a moment to read Mike Stathis's latest excellent
> piece on the risks inherent in this space, I strongly encourage you
> to do so:
>
> seekingalpha.com/artic...
of Value
I also have to say, and it has been brought up before. That the NAB being so against this merger shows just how dumb the arguement, people have about satellite not having a future is. I have no dought that there are penty of very intelligent people at the NAB, and they are not so convenced that satellite radio has no future. they are so convenced it does as a matter of fact that they have everyone that is involved in terrestrial radio against it. Lets face it, if satellite radio was only going to last as long as these nay sayers say, then there would be no need to even bother to stop it. Just let it go out of bussiness on its own right. But you know that is just common sense to me.
I've noticed the same pattern from your typical Liberal. Freedom of Speech only applies to those who agree with them; any dissenting opinion must be silenced.
WTG, Mike. You've just placed yourself on the same level as an Elitist Liberal, and since you didn't open your article to the free exchange of ideas, I, for one, did not bother reading yours. I have no time for Elitists.
shure46, Are you kidding me, are you going to try and compare some heckler being removed to Ann Colder, and many others having pies and other things tossed at them as they tried to speak.
First of all there is a difference between removing a heckler from ether forum weather it be a democrat or republican and having someone (liberals) trying to toss grap at the person giving the speach. Not once have I ever seen a news story of a republican interupting a democrat that way, but I have seen at least 6 times that have shown liberals attacking and not with words conservative speakers.
of Value
of Value
PPM stands for Portable People Meter. It's the new digital audience measurement system that is currently being rolled out in several major markets nationally this summer and fall. PPM is much more reliable than the decades-old paper-based diary system, which was actually antiquated and of questionable reliability and accuracy.
With PPM, a digital signal records exactly which station is being tuned in and for which periods of time. This removes the guesswork and unreliable memories of which station people think they were listening to and for how long.
When a listener is tuned to satellite radio, PPM records no Time Spent Listening to terrestrial radio. This means lower TSL, which translates to lower ratings and lower ad revenue for terrestrial radio stations.
Terrestrial radio will naturally fight any medium that poses a direct threat to the integrity of its bread-and-butter listenership: People in their automobiles. However, just because terrestrial radio deems it a threat doesn't mean that satellite radio will be profitable, or that their stocks will make investors fabulously wealthy.
VicDave, me alone, no. But there you go again skipping details that do not fit your arguement. So I reprinted them for you.
She then asked what state I lived in for her spread sheet to show who is for and against and what state they are from. Her # is for those that want or dont know it is (202) 418-2500
cos1000, There are plenty of other people from Tennessee that have made it known to her that they are for the merger from the Mayor of Nashville to the country music industry. I also think that Tate can see that the radio stations are as biased as possibly can by, unlike the mayor of Nashville. Plus I have no dought that the people (ones that have shares or are users of satellite radio) of Nashville are for it and have given her a call to say so like I did (even though