Sirius XM Radio Fact Check

There are so many lies and fallacies regarding Sirius XM Radio (NASDAQ:SIRI) and its future potential it should make more people think hard about the opposition the company faces.  The company and its shareholders always seems to draw massive amounts of negative press just prior to quarterly conference calls from many mainstream and online investment media outlets, in addition to several bloggers out there.  In fact I feel way too much negative attention has been put on the company by people who claim to not even hold a single share of its stock.

One has to wonder why so much negative attention seems to come from parties who should be indifferent at best.  One has to also wonder why those same negative comments are never backed by actual facts, but by posturing and deflection of any sound or intelligent responses by writers like myself, who have no agenda other than to make money and learn as much about the company’s true facts and figures as we can, while sharing what we know with other investors.

A prime example of this is the company’s debt.  I have seen several posts and articles across the internet touting over 7 billion in debt and how it is insurmountable.  Well, let me just say that most of the posted figures can be a bit misleading and sometimes warrant a good bit of scrutiny and investigation.  Yes there are liability and debt figures; However, the overall numbers are skewed, due to large amounts of deferred revenue, credit and tax — which are carried as a liability until recognized in earnings.  In fact, $3.3 billion of the $7.3 billion in Sirius XM liabilities is deferred revenue, until recognized.  Very clearly… this is not all debt as it is portrayed.

Taking things a step further, of Sirius XM’s $3.3 billion in debt only $1.3 billion is at rates above 10%; another $250 million is at 10%.  That leaves a remaining $1.8 billion at rates below 10%… so point of fact, the majority of Sirius XM’s debt is BELOW 10%.  Clearly this shows debt has been placed in a much more manageable situation than it was in even 4 or 5 months ago, yet there is still work to be done. The company as per CEO Mel Karmazin, is turning the corner on profitability and increasing EBITDA guidance during the worst financial crisis of many of our lifetimes, this is nothing short of astounding. They are looking to increase free cash flow and shareholder value as per Mel’s comments at the recent Liberty investor meeting.  However, it is not a significant amount as yet, and paying off some of the previously mentioned debt is a surefire way to have a huge impact on the perception of the company and the stock, as will increased subscriber numbers, especially after the forecast of over 2 million subscribers lost for the year made earlier this year, and re-hashed incorrectly during the weeks prior to the 2nd Quarter Conference Call.  The forecast of over 2 million subscribers lost for 2009 is ringing pretty hollow right about now. Cash for Clunkers actually helped Sirius XM for Q3 and the year to that end.

Also, there seems to be a very purposeful and deliberate misrepresentation of facts regarding sales of shares from company insiders at Sirius XM.   Anyone who wants to can read the filings at the following link: http://investor.sirius.com/ but to put it all in plain enough language, these shares were sold as part of a 10-5b plan and were given to the officers of the company as compensation for work they did in lieu of cash payment. These officers of Sirius XM in fact have large share holdings even while selling these compensatory shares through the sales plan. The sales of the compensatory shares are pre-planned and are not in control of the company officers, they are being sold by a proxy to avoid any possible insider activity accusations. Below is a list of officers and their holdings as of October 2, 2009.

For anyone to suggest  shares were sold based on bad news among insiders is nothing short of a lie and a deliberate attempt at misinformation that should be investigated by the SEC if it is in a news article of any type. The above holdings are in addition to the shares being sold and have been held throughout the planned sale program. As you can see, it is important to do your own due diligence with regard to Sirius XM Radio or any other equity.  Let the facts and your own review of them be your guide.

With the Sirius XM third quarter conference call coming this week on the fifth of November, we will hear once and for all what recent synergy improvements , debt refinancing and some programs that were implemented over the past several months, as well as the iPhone, iPod touch and Skydock have been able to do to help the bottom line. There may be some surprises in store compared to past history in regard to 3rd quarter performance. We will all find out soon enough.

Disclosure: Long SIRI