A Thanksgiving Prayer for Sirius XM

It's time to be grateful, but Sirius XM Radio (Nasdaq: SIRI  ) shareholders are probably feeling more like turkeys these days. The stock has hit an all-time low of $0.14 in each of the past four trading days.

This is certainly not where investors thought they would be. The merger between Sirius and XM cleared the interminable regulatory hurdles. The post-merger synergies are mostly on track. However, a combination of burdensome debt levels in a tightening credit environment and cascading subscriber targets in the face of a perfect storm of waning discretionary income and a plethora of music-consumption alliances is clobbering the stock.

Since I know that I am bound to be thankful for so many things tomorrow between forkfuls of cornbread stuffing and pumpkin cheesecake, I may as well take the time to express my wishes for Sirius XM between now and next Thanksgiving.

Gobble gobble, one of us
Let's start with the lingering possibility of bankruptcy reorganization. It is essentially why shares are being swapped for pocket change and belly button lint today. Mr. Market doesn't think that Sirius has what it takes to repay more than $1 billion in debt -- of a whopping $3.4 billion in total debt -- that is due next year.

My first Thanksgiving wish is that Sirius XM doesn't file for bankruptcy. I have received emails pointing out that CEO Mel Karmazin has said that bankruptcy isn't an option. If only it was that easy. Unfortunately, it may not be up to him. It's hard to raise money selling new bonds or equity when your stock trades for pennies. Even if he is somehow successful, the dilution will be colossal.

Sirius XM creditors would love to be made whole, but they may be forced to settle for less by forcing Karmazin's hand into bankruptcy court if they feel that the company's direction will continue to disintegrate.

That would be terrible. I'm not just saying this for the stock's passionate common shareholder base that would likely be wiped out, or even for the eventual privatization of a carved out Sirius XM that would leave me with less to write on the matter. Any consumer-facing company that files for bankruptcy reorganization threatens its very model by igniting defections within its user base.

How many people do you think will go shopping at Circuit City (OTC BB: CCTYQ.PK) this holiday season, fearing that this month's bankruptcy filing will get in the way of merchandise returns or gift card redemptions?

Even if most of the satellite radio giant's 18.9 million subscribers know the difference between bankruptcy reorganization and outright liquidation, many will bolt fearing unwelcome changes under the possibility of new ownership at the other end of the reorganization spectrum.

Changes you can believe in
As a subscriber to both XM and Sirius, I wasn't happy with the programming shuffle consolidation that took place earlier this month. However, there are plenty of items on my wish list that do involve the company changing:

  • I want an app to let me stream Sirius and/or XM on my iPhone. Sirius XM has forged relationships in the past with cell phone networks and handset makers like Alltel, AT&T (NYSE: T  ) and more recently Research In Motion (Nasdaq: RIMM  ) . However, these are ridiculously overpriced plans given the limited content and freebie alternatives. I want an Apple (Nasdaq: AAPL  ) app -- and not just a third-party one -- to make it seamless for paying subscribers with receivers to make the included Web streaming truly portable.
  • I want Sirius XM to diversify its revenue streams. The stock has been hammered as the company talks down its targets, as it lives and dies by subscription revenue. Why is advertising revenue per listener going down as its affluent audience is scaling higher? Why isn't it monetizing its site and Web streaming? Even eBay (Nasdaq: EBAY  ) and Wal-Mart (NYSE: WMT  ) run third party ads on their sites, and those are companies with far more to lose in shooing someone away with a revenue-generating click.
  • Tapping that same vein, I want Sirius XM to make the most of its audience by launching dynamic and sticky online destinations. Shouldn't each of its genre-specific music channels be the catalyst for a social network? Aren't there more outlets to market its original content?  

In the end, Sirius XM has so much untapped potential. My ultimate Thanksgiving prayer is for Sirius XM to be around -- bigger, better, and more dynamic than ever -- by the time Thanksgiving 2009 rolls around.

More news than static on Sirius XM:

Am I wrong? Am I right? What do you think Sirius XM should be doing to shake this rut? Post your thoughts below.

Wal-Mart Stores is a Motley Fool Inside Value selection. eBay and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (24)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 26, 2008, at 4:01 PM, daveonkels wrote:

    I too am a long-time satellite radio fan and both an XM and Sirius subscriber but when the new programming was deployed on November 13th with zero communication and virtually no input from its subscribers, I felt compelled to create a platform for our voices to be heard. I launched http://voiceofthelistener.com last weekend and it has garnered an incredible number of comments from fellow frustrated listeners. My plan is to gather this feedback and share with the board of directors. I would encourage your readers to visit this site and weigh in with their comments.

  • Report this Comment On November 28, 2008, at 6:14 PM, TopAustrianFool wrote:

    Keep dreaming "Fool". You should know by know that management is completely inept. They are clueless. Hey maybe you'll get lucky, they will read your column and fired themselves. They are proven loosers.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 783701, ~/Articles/ArticleHandler.aspx, 10/1/2014 11:11:44 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement