By Steve Garcia
Today Sirius XM (NASDAQ:SIRI) CEO Mel Karmazin gave the company’s Q1 2010 results. Among the metrics was a 1 cent positive earnings per share (EPS). Karmazin also let it be known that as of last week’s numbers, Sirius XM had over 19 million subscribers already this year, with just a third of the 2nd quarter complete. The company is also among the top 8% of NASDAQ stocks based on Market Cap. Mel also let shareholders know that delisting fears and the specter of a reverse split to satisfy those fears was over. Sirius XM has also been able to pay off some debt; and reduce interest expense to a less than 9 % unsecured rate on the most recent debt re finance. The company, which struggled after the merger approval in 2008; and nearly went bankrupt in early 2009, continues to report an astounding turnaround quarter after quarter since obtaining a short term, though costly loan from Liberty Media and John Malone. The short term financing was costly in that it resulted in Liberty Media obtaining 40% of the company through the loan agreement. Sirius XM repaid all outstanding balances from that short term loan in a very timely fashion.
Unfortunately, no matter how good the news, Sirius XM continues to be attacked at every turn. Several media participants have taken Mel Karmazin’s response to a question about Howard Stern’s contract this morning, in which he said to listen to Howard to find out the status of his contract negotiations and attempted to turn it negatively in the press. Stern signed with Sirius for $500 million back in 2004. However, it is a far more fiscally responsible climate he is negotiating in now since the merger of Sirius and XM two years ago; Sirius XM has already re negotiated several contracts at reduced cost, but that hasn’t stopped Stern from trying to leverage his popularity for the best position in negotiations; as he should. Stern has said he was entertaining offers from both conventional radio and even television’s American Idol program earlier this year. Stern has also repeatedly stated he could never return to terrestrial radio. In all likelihood, a deal retaining Sterns’ services will be achieved with Sirius XM before the final bell tolls on his current contract.
There is also an issue with wireless spectrum being played out with the FCC and the WCS coalition, who got to buy spectrum on the cheap because of the issues surrounding it with its close proximity to satellite radio spectrum. These issues were a matter of record at the time the spectrum was auctioned, and were the very reason why the spectrum was sold so cheaply at auction, because there were very tough limitations to its development due to issues with satellite radio interference; but now apparently the owners of that spectrum want to change the rules to suit them, regardless of its impact on satellite radio and its subscribers. Sirius XM has fought for its subscribers vigorously on this front, but a final decision is still pending. Automakers have also sided with Sirius XM on this issue. What the FCC decides remains to be seen, but one would hope that they would uphold the limitations and conditions under which the spectrum was auctioned off at a minimum, and not permit the conditions to be altered now in a fashion which not only interferes with satellite radio, but will increase the value of precious and limited spectrum that was sold to the holders cheaply due to the limitations, and short change satellite radio subscribers.
All in all, 2010 has been a very eventful year so far for Sirius XM. Having overcome possible delisting and a reverse split scenario; reached the 1 dollar mark and once again improved the bottom line. The company is also poised for re entry into the Russell 3000 Index and has plans to launch a new more powerful satellites, one in Q3 this year, as well as another next year. 2010 continues to look good for Sirius XM with continued signs of financial improvement as well as the recovery of the Auto industry. Certainly, Sirius XM will benefit as long as those two situations remain on track.
Disclosure: Long SIRI
Great article Steve. Things are looking bright in Sirius future. With autos continuing to do well. Sirius will blow away the 500k sub additions on the year. I think you will also see Howard resigning during this quarter. He is going no where.
I can’t believe SIRI has not been upgraded today. It’s obvious that issues in previous analysts’ reports have been addressed and overcome.
Get with it and play fair!
Upgrade SIRI.
Disagree completely with the concept of this article. Sirius has won & is winning, anyone care to look at the over all market today, the fact that we are sitting as I type this in the $1.15 to $1.16 range, & attacks on stocks are not uncommon. I cannot believe that this of all sites would not tout the fact of what has occurred this year, instead of acting as if we always are getting the shaft,fact is siri is fine,some should maybe just sell & move on rewind to last year, my God some of you would bi..tch if we were at 10 dollars
Keith,
think you should read the article before you fly off the handle.
ASM … Keith is referring to “concept”. I too read the article, and liked the 1st paragraph and what I hoped you would be leading into was more of the Q1 report results … perhaps tie in the likelihood for stronger FCF moving forward, potential upgrades, etc. I did not expect it to flow into Stern and WCS. Just my FWIW.
smoky,
Did not see a need to re hash the numbers, but point taken. I wanted to put to rest some of the anxiety that comes with owning this stock and to let those who don’t, know about some issues that have been raised as recently as today. We have seen what ignoring those issues does, so I felt it best to deal with them.
Cant say i agree Keith. You missd ASM’s point. Its about crapping on someone wedding day.. Why bother to mislead your readers about a company day in and day out? So we should ignore this? It was topical and timely, good article asm.
Cant win them all keith. Sorry you didnt like this one. If you want comments from today, an article is coming out tomorrow with more time to digest results and allow the news flashes of facts of the day, which we all know to play out.
I now get it
ATnT, Verizon, Sprint etc. all want Sirius to die so they can have It’s spectrum.
We’re up against ravenous beasts.
I agree. Our enemies are many.
We took a hit today due in most part to Mel Karmazin. I hate to say this guys but he is TOO Conservative. A simple look at the numbers show the 500,000 sub gain this year will get beat like a stepchild. Why this guy couldn’t have raised the target just 100,000 and this wouldn’t have happened. Mel has a real problem with feeling the Street and what they are thinking. They are watching his every move and disecting every sentence. Someone need to make sure he understands that! Sirius is doing great and well on its way to being a Cash Cow… Right now we need a cheerleader, not a conservative CEO. Get on the ball Mel and Pump…EVERYDAY if that’s what it takes! Look at Steve Jobs… He stands up 100% for EVERYTHING his company does…We hear from you 1 hour every 3 months!
Possible he feels pumping wont work. Cant argue with his results from .12 cents so far.
Nice article once again. Thank you.
Yes indeed, 2010 is looking very good.
My guess on autos…. 12MM (IMO) with an improving economy, as we are seeing. An improving balance sheet is what we want too. Thanks again.
I think if Mel would have gave a positive guidance for the balance of the year the stock would have risen in spite of the sell off in the market today. I think he missed an opportunity and sometimes he is to conservative.
With a positive year end guidance lets say it goes up to 1.35. Over the next quarter it rises to 1.50 and so on. By the end of the year the stock is at $2.50 to 3.50pps.
So we miss the 4th quarter which is usually a great qtr, and the stock take a .50 hit, and we are sitting at the 2.00 to 3.00pps range. Fine.
That is better then no guidance,and getting hit and driven under 1.20pps. We all know that the stock is moving in the right direction. Mel loves to understate and over perform. I know he is conservative.
But at times he needs to step up and show more confidence in the company and give a positive guidance for the balance of the year. The analysts will respond to that, but as we have just seen today, they will not respond with a I don’t know, I don’t want to say. I don’t want to commit, I can’t comment, I don’t want to give a guidance etc etc…Big mistake to the shareholders of the company. It would not suprise me if he does not get some phone calls from some of the largest stockholders.
If he pulls more of the same at the next CC we will still be still sitting at 1.20 pps
imho
vaporgold
I agree vaporgold. Not about your price projections, about guidance. But, advantages to both methods. Cant argue with whats working now. Todays action was acceptable, especially on a market day like this.
King1
The numbers are just pulled out of the air, but knows that they could not happen with more analysts giving SiriusXM buy recommendations?
My point was that the analysts were very disappointed. From their prospective, they want some guidance to base their recommeded stock buys for SiriusXM to their clients. They did not get that. So they will wait until the 2nd qtr. Then Mel says nothing.
Then hopefully by the 3rd qtr Mel will have enough confidence to give guidance which we will be deep into the fourth qtr by then to say, we will hit the numbers…will by that time the local grocery bagger will know that we will hit the numbers.
The analysts want to make their clients money by buying shares that will appreciate in value in the future. Buy low sell high. The stock is low right now.But when the CEO does not have enough faith to even comment or commit..why should the analysts…done venting.
Thanks
imho
vaporgold
True, but if these analysts have half a clue, the numbers are obvious now. If they cant see it by now,they might never.
King1
Well you are right, they do see it..Janco and Bloomberg are moving forward. I would too. I think it will be a blow out year!!
imho
vaporgold
Once again, a very nice read, Steve. Despite the markets reaction, I believe Mel reported very solid Q1 results. I know some have pointed to FCF as a disappointment, but to me as long as I see debt being reduced and the balance sheet improving, I know cash is being used wisely. As far as Stern goes, let the media do whatever, it’s just free PR that SXM remains alive and thriving and Stern will sign eventually at less cost to the company. The wireless spectrum is just another distraction and I have confidence that SXM will prevail with the FCC ruling at the end of May or if they must in court…their case is very strong. Overall, with the markets off so much today, the pullback in pps for SXM was not that bad as it recovered somewhat by the end of the day despite the markets remaining way off. Looking forward to SXM being added to the Russel 3000 in June…don’t expect any pullback to take us below a dollar…just too many positives…