Sirius XM Radio: Good Quarter, Average Call

When the financials of Sirius crossed the wires at 7:00 AM Thursday, things were looking pretty good in the world of satellite radio. Sirius had posted a good quarter, beat the Street on many metrics, and the scaling of the business model seemed evident. The press even seemed impressed, releasing headlines such as “Sirius Narrows Losses”. The pre-market trading was positive, and it seemed everyone was anticipating a call where investors could finally get more detail after 18 months of waiting.

Then the call happened. It was a very average call, and actually did very little to entice the Street. Synergies of $400,000,000 were once again spoken of, but no meat and potatoes were given on the plans that would be executed to get there. After a drawn out merger process where guidance was scant and generalized, investors were in hopes of seeing something real and tangible. It unfortunately did not materialize in this call.

To be fair, the merger is new, but still some point blank discussion was needed, and instead we saw blandness. Yes, there were promises about news forthcoming that will be released over the coming months, but this being an election year, and with a bad economy, people want to touch and feel their information.

Mel Karmazin is a brilliant businessman. He has been the driver of success throughout his career. People want to bet on him, but the dollars are simply less discretionary than before, and like or not, people, as well as institutions are far more stingy when it comes to where they are putting their money.

I felt going in that this call could be somewhat of a foundation for the merged company to set the standards and stage for how the performance going forward would be measured. I was looking for a series of steps that would lead to the big picture. Steps that were track-able and quantifiable. Instead, I got simply the big picture.

Now, my frustration with the call does not mean that I or others do not still see the big picture. I think most everyone sees the potential. What investors are trying to figure out is how rocky the road is on the way to the big picture. The company, in my opinion, needed to provide the “pathway” that gets us all to where we want to be. Instead of saying that there would be “savings on nearly every line item,”  we needed to hear a few of the bigger points where these savings are anticipated, and in what magnitude. We don’t need exact figures, but instead a series of general ideas that outline the existence of a plan.

If I was grading the quarter, I would give it a “B”. The numbers were impressive enough that people could see demonstrated progress in the company. It was a good stand-alone quarter, and the thought that the merger would bring about synergies made the future look brighter.

If I were grading the call, I would give it a “C”. There simply was nothing that carried excitement and anticipation after the call.

Perhaps we will see greater details in the coming days.

Position - Long SIRI

Comments

[ZenInvestor:]

The 'expectation' that the call would have details so soon after the merger was a bit of fantasy. This stock is not going to move much without the 'savings' being more tangible, but layoffs and major changes in programming will take a month or two to sort out. The terms of the financing, in this unbelievable credit market we are in, make the cost saving that much more of an imperative.

This is now a 'Long' play, and in the months to come the details of the new SiriusXM will come out and lift the stock. But for those who where looking for a 'pop' after the merger, this has indeed become a huge disappointment.

2008 Aug 08 09:14 AM

[tech man:]

THANKS TYLER, ANOTHER GOOD ARTICLE. THANKS AGAIN FOR THE HONEST EVAL. I AM LONG SIRI, I AM WAITING FOR MR. MEL TO WORK HIS MAGIC. I AM GOING TO HANG IN THERE. BIG THINGS THINGS TO COME. YOUR WORK TYLER COMPLIMENTS MY OWN RESEARCH. THANKS AGAIN. T.M.

2008 Aug 08 09:35 AM

[Newtoit:]

Tyler, My being 56 years old, a three year Sirius sub. and new to the market, I continue to look forward to your articles and also the responses. Although my 6400 shares @2.40 would have loved to see a bump after the merger, I remain long and excited about the future. You continue to help me remain positive, and for this I thank you.

2008 Aug 08 10:01 AM

[User 190103:]

My guess for why the call was average is that Sirius and XM kept a lot secret from each other until the merger closed. One thing you can count on from Mel is that he won't disappoint with glowing estimates he isn't sure he can make, unlike XM did in the past. Good news will trickle out in the months to come and confidence will grow.

2008 Aug 08 10:30 AM

[Sirius Road...:]

Hey Tyler, who do you figure has the better tan these days, Uncle Mel or Angelo Mozillo? I wonder if Uncle Mel was on Countrywide's VIP list?

Anyway, Uncle Mel's tan is starting to fade . . . all that travel back & forth to Washington is really keeping Uncle Mel away from the beach house. Good thing for that early tee time today down at Due Process Farms in Colts Neck, huh Mel?

That's ok Uncle Mel . . . like ya said on the call, get back to the unsecured creditors with more info after Labor Day.

My grade of the call is a "D"

As suggested in my prior posts, Uncle Mel didn't bring the motorcycle . . . just the same old tired, scripted, talking points:

TP-1 $400mm Synergies
TP-2 Best Available Financing & Over-Subscribed
TP-3 20mm subscribers
TP-4 Second only to Clear Channel
TP-5 Second only to Comcast

yada-yada-yada . . . just more of Uncle Mel peddling his Blue Dog Elixir.

Later today I will adrress the unanswered questions that have been glossed over by the mainstream and the need for licensing, regulation and uniform standards for the so "independent" analysts . . .

2008 Aug 08 11:02 AM

[Sirius Road...:]

Who's Laughing Now

In listening to yesterday's conference call I kept wishing that JP Morgan was there . . . no-no, not THAT JP Morgan; JP Morgan the entertainer . . . you know, from the Gong Show . . . so we could get Uncle Mel and his Gene-Gene Dancing Machine routine off the stage.

Uncle Mel musta put out the "A-List" carving board yesterday (A-List being Prime Rib, B-List London Broil, C-List Dried-Out Chicken) cuz there was only 1 cogent question from the analysts. Guess who. Yup, Marvelous Mark Wienkes. Essentially, if I may take the liberty of translating, Mr. Wienkes was asking, "Hey Mel, how much cash ya got on hand bro; Ya gonna make it through the end of the year? . . . what's the burn rate? To which Mel referred back to the 6/30 Q . . . not good enough Uncle Mel.

Now, as to Mr. Wienkes . . . who seems to have been on point thus far and was universally panned for his $1.75 target and "convicted sell" rating. Mr. Wienkes was either exceedingly prescient or had advance knowledge of the dilutive effect of the merger financing; I tend to think the latter. Which raises the issue of regulation and sanctioning of analysts and the need for uniform standards in reporting. If Ben & Hank are going to run midnight madness sales at the Fed Window, then the "houses" need to come under the same type of oversight as commercial banks, with an independent regulatory arm and licensing body specifically for analysts, and not just those covering equities . . . which is beyond the scope of this editorial.

The price direction of negative-earnings-equi... is almost entirely influenced by insider information and nearsider trades. The rest . . . institutions, retail investors . . . merely fodder. Statistics and technical analysis create the appearance of legitimacy but are no match for insider information. The unsecured creditors should rightly wonder what exactly Mr. Wienkes knew and when he knew it . . . and shouldn't have to wait for the book deal.

Now, Uncle Mel . . . get off the "oversubscribed" bandwagon, please. That blue dog ain't huntin. Whenever I see a real estate agent touting the sale of a property such as "under contract in 5 days" or "bidding war" . . . I am more inclined to believe that the property was underpriced than I am in the agent's fabulous sales skills. The financing deal was oversubscribed for one reason . . . the terms were too generous; Bad advice.

Also Uncle Mel, what new information was it that was revealed yesterday, that wasn't available last week, that caused the postponement of the call? Surely staff counsel could have reviewed abstracts of any expiring OEM contracts in that time frame.

So, with the common shares again touching $1.29 today, and no real guidance about cash-on-hand, the unsecured creditors might reasonably consider salvaging any residual long positions still remaining.

Geez, remember the good ole days when Sirius shareholders used to be able to laugh at Vonage and Level 3 and Etrade.

Who's laughing now?

2008 Aug 08 03:19 PM

[muley101:]

Mel's answer to the question of how soon the interoperable radios could be in new cars was unprepared and boneheaded. The answer should have been " You could order a new car without a radio this fall and have one put in at Best Buy". Then we would see how fast the car companies could move on it.

Mel was also unprepared to talk about marketing efforts to increase subscribers through year-end. Surely they have great plans in the works! If not they need a whole new marketing department. Here's an idea: seekingalpha.com/artic...

Finally, Mel failed to lay out a 3 year plan for profitability.

What we got waqs a standard call for the stand-alone Sirius company when the market was looking for clear direction for the combined company. Let's have a redo. Mel and his staff need to conduct a shareholders conference call within a week to lay it all out.

2008 Aug 08 04:32 PM

[Joe F.:]

Tyler:

I would expect that Mel kept some stuff under his hat and close to the vest for a reason.

They do compete with many others in the audio listening and subscription space and I'm sure they want to keep some of their strategies for organic growth and potential partnerships very quiet as a competitive advantage right now.

Aslo, having just cleared the FCC for the merger, I don't think they want to stretch their reach publically right now, though rest assured much is happening behind the scenes.

2008 Aug 08 05:08 PM