Why Apple Should (And Could) Buy Sirius

| About: Apple Inc. (AAPL)

Many of you have seen me post on Sirius (NASDAQ:SIRI) topics, I am a long of the stock and have been for about 18 months now. Through the ups and downs I hold steady (though do hedge with an occasional covered call against my shares) and look for reasons to continue to hold and watch the financials get better. I am an optimist most times (glass half full) and am still to this day.

Throughout the last 6-12 months, there has been talk of SIRI being bought out by Liberty (LMCA), with much of the focus being on this upcoming March. Back and forth I have seen pros, cons and different opinions on the matter, and wonder which (if any) will happen.

But this weekend I was browsing on my Ipad 2 (OK I was actually playing some games on it) and had a thought; what if Apple (NASDAQ:AAPL) actually made a play for Sirius? Since I own both, how would THAT work out for me? It has been suggested before.

My first thought was (as someone with a sales and marketing background), how could Apple use what SIRI has to their advantage? What could they gain from spending the millions of dollars to acquire the 60% from the general public?

I am sure there are hundreds of reasons both why and why not this would not make a good fit, but as I thought about it, it COULD work for them in a huge way:

21 million + subscribers under their belt: Not that Apple needs more people to buy their product, but now a bundle situation occurs. You have 21 million + people ready and waiting for something new, perhaps include basic SIRI on the Ipad, Iphone, and ITV (maybe even I-radio?) Endless possibilities! You could have an app on the Ipad that allows you to download your songs AND also choose which Sirius stations you want (for a fee of course). Now you have millions of potential new customers to work with.

Apple TV: They also could incorporate the Sirius stations to Apple TV. Again for a charge, you could have the Sirius stations come right to your living room, no more extra units, one in your car, and your Apple TV. Perfect for get-togethers, parties etc. it goes on and on. Maybe you cannot finish watching a program from your Apple TV and you and the kids are ready to take a 4 hour trip up to the country house. Since you can now sync up with your radio/monitor in your mini-van, the kids can now watch the end of SpongeBob in the car. This leads me to...

Penetration into vehicles: The beauty of the millions of subscribers Sirius brings to such a deal is that they are in our vehicles, a place where many of us spend much of our days, for work and play. How about a new platform that actually does everything (sorry Mel, I like the Lynx you came out with but Apple can trump you in a second here). Can you imagine a dashboard where you can get your Sirius stations and your email and the web? All for a low cost of $500, $600, $1,000? I would pay quite a bit for something like that (being in my car quite a bit) and I am sure others would too!

Tax friendly: I am not an expert on taxes, especially when it comes to takeovers, but this seems fairly simple, please chime in if I am wrong here. Apple makes a lot of money, Sirius has write-offs extending till the year 3000 (OK being funny here) - why would this not work for them? What better match would there be than a company that prints their own money, and not have to pay tax on a portion of it?

Price: How much would Apple have to pay to acquire good old Sirius? $3 a share? $3.25? Could they get to the 51% they need to, or do they want more? Would they go to Liberty directly and try and snatch their 40%? I would think anything $3 or less would be a steal, and under $4 would still make sense. Remember, Apple is sitting on FCF of more money than most banks in this country, what do you think their return will be on something like this? A heck of a lot better than sitting it in a bank.

This may be a pipe dream for both me and probably a lot of us, but these are my thoughts and I wanted to get them out there. I hope you take the time to comment, I am interested in hearing your thoughts. Who knows, maybe we dream big here and instead of a buyout, Mel reads this and instead starts a partnership with Apple?

Disclosure: I am long SIRI, AAPL.

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