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3 Questions for Sirius XM

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We're now less than 24 hours away from Sirius XM Radio's (Nasdaq: SIRI  ) third-quarter report. Since it's one of the market's most heavily traded stocks in terms of sheer volume, speculators are lining up on both sides of the report.

Is this the report that validates Sirius XM as a cash-flow positive media giant? Or is it another step down for a platform that may have peaked last year?

Hold your love letters (or battering rams) for the company. Let's go over three of the meaty questions that should be answered tomorrow.

1. Where are the subs?
After shedding net subscribers during the first and second quarters, it's time once again to take roll call.

There are a few things working in Sirius XM's favor here.

  • The trend itself has improved, since closing out the second quarter with 185,999 fewer subscribers is better than the 404,422 listeners it lost during the first three months of the year.
  • Between Ford's (NYSE: F  ) bullish quarterly report and the successful "cash for clunkers" campaign, there are signs of life in the automaker industry. This is arguably Sirius XM's best source for new accounts.
  • The economy appears to have turned, and other subscriber-based consumer services are bouncing back. DISH Network (Nasdaq: DISH  ) turned positive during the second quarter, leaving Sirius XM, TiVo (Nasdaq: TIVO  ) , and Time Warner Cable's (NYSE: TWC  ) flagship video service as the only heavies losing subscribers.

Two months ago, my best guess had Sirius XM shedding 80,000 subs, as an uptick in churn over recent rate hikes and new fees eat into the new bodies. I opened up the stage to other crystal ball watchers, and I'll crown a victor among the dozens of predictions tomorrow.

2. How is the bottom line holding up?
Last year's merger between Sirius and XM has created several cost-saving possibilities, above and beyond the typical synergies associated with major deals where overlapping redundancies are eliminated.

Subscriber acquisition costs have diminished as Sirius XM can market satellite radio with a unified front, instead of the two companies having to attack one another. As the only game in town when it comes to satellite radio, Sirius XM will have a little more leeway with its automotive partners and on-air content when contracts come up.

The extent of the cost savings finds Sirius XM ramping up its projections for adjusted operating profits in 2009 -- from $300 million to $350 million to $400 million -- over the past year, despite subscribership shrinkage.

A healthy quarter, enhanced guidance, or a clear path of conviction to actual profitability will go a long way toward offsetting any potential weakness in its subscriber tally.

3. How about them Apples?
There was a lot of hype behind June's release of an official streaming application on Apple's (Nasdaq: AAPL  ) App Store. Excitement died down after it was revealed that Howard Stern wasn't available on the app. It also irked satellite subscribers to learn that they would have to pay extra for streaming, perhaps spoiled by the Netflix (Nasdaq: NFLX  ) couch-potato subscribers who can stream films online at no additional cost.

Even CEO Mel Karmazin deflated those hopes during the company's conference call in August. He didn't reveal the actual count of App Store subscribers but warned that it's not "a significant number."

That was then, though. The third quarter is the first complete period in which the premium streaming program was available. It would be great to hear some hard numbers here, and at least a little more color as to the significance of online subscribers will do.

Come back tomorrow when we'll break down Sirius XM's report, discussing the answers offered to these three defining questions.

Apple and Netflix are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services, free for 30 days

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does own shares in Netflix and TiVo. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

Read/Post Comments (15) | Recommend This Article (6)

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 04, 2009, at 11:29 AM, SIRIDoom wrote:

    Near term, I give up hope for SIRI. We will see the usual Q report bounce.

    The Rev-Split and NASDAQ delisting issue is a dark cloud. I don't see SIRI reaching the 1.00 level in time to stop the rev-split.

    Two years is a long time waiting for this company to turn around. Managment has never been able to make money selling a good product. SIRI is a very sad story.

  • Report this Comment On November 04, 2009, at 11:34 AM, DiabloD3 wrote:

    Wow, does TMF own a lot of Sirius short and can't get out or something?

  • Report this Comment On November 04, 2009, at 11:40 AM, brandonmatthews wrote:

    EPS: .01

    Free cash flow positive

    135k net sub additions

    Crown me...

  • Report this Comment On November 04, 2009, at 11:40 AM, brandonmatthews wrote:

    EPS: .01

    Free cash flow positive

    135k net sub additions

    Crown me...

  • Report this Comment On November 04, 2009, at 11:42 AM, RAF22 wrote:

    Please see my comments on the strength of Sirius XM in the article below this one: October Auto Sales Look Positive For Sirius XM

    The powerful combination of unique, proprietary content and seamless high quality audio distribution is unmatched by any other so-called competitive alternative. This combination is similar to the business plan of BLOOMBERG - which drove the company from its infancy to dominance in its industry. Sirius XM is in the early stages of exploiting this powerful blend of CONTENT and distribution and the stock is now trading from dominant strength. It is much too early to contemplate reverse-splits, and the like, as the company is on the threshold of benefitting from all recent innovations and extended relationships within the auto industry that are now coming on stream. Any changes to the capital structure of the company should await the strength that certainly lies ahead as these revenue streams continue to build.

  • Report this Comment On November 04, 2009, at 11:44 AM, jimmylegg wrote:

    Just FYI, You pay a hefty additional fee for streaming on Netflix, from 5.99 monthly to 18.99 monthly. Netflix is soaring

  • Report this Comment On November 04, 2009, at 12:09 PM, ThongLover854 wrote:

    SIRI-DOOM-DUMB --- Please just go away. I would think that you would be embarassed after your little drunken blow up on Seeking Alpha last night. I'm hoping you were drunk. You're a sad person and you really are no use to anyone here looking for real information.

    For those of you that didn't see SIRI-DOOM's NAZI-JEW-HATE spewing last night, please see the link below. Some comments have already been deleted. At one time, you had about 25 comments out of 30 running, didn't you? And the first comment was you saying "This is my last comment.."

    That's rediculous, juvenile and pathetic. If were you, I would apologize and leave and not come back...but of course i have dignity. Look it up...

    Please don't respond to me. I will not respond back. Just go away. Thanks...Mel.

  • Report this Comment On November 04, 2009, at 12:52 PM, cantbefoolish wrote:

    Ah, I'm finally getting where SIRIDumb is coming from. He's a Fox news lover and a religious nut. So, he gets his opinions from a biased - opinionated news channel and from an invisible dude in the sky. Sounds a lot like my older brother, who is almost 35 and still living with the parents. He'll blame everyone else, but himself for his problems.

  • Report this Comment On November 04, 2009, at 1:05 PM, stocknblondes wrote:

    siri doom why would a person waste their life on countless message boards and stock forums 24/7, discussing the dangers of owning such a volatile stock?

  • Report this Comment On November 04, 2009, at 2:23 PM, SIRIDoom wrote:

    SIRI the day before

    Normally, the street via institutions have an idea of what a quarterly report will reveal. Looking at SIRI trading today, we can guess the report tomarow morning will have no thrills or chills.

    The surprises (if any) will come from spoken words as Mel explains the debt conditions, rev-split probability, and future plans for SIRI. A few moments of spoken words from a very tight lipped company is a valuable thing…

  • Report this Comment On November 04, 2009, at 2:51 PM, estabank454 wrote:

    I happen to have Sirius radio and I thouroughly enjoy it. I hardly ever listen to regular radio anymore. No commercials. What a way to go!!!. I just bought the stock and I see GREEN to the horizon...

  • Report this Comment On November 04, 2009, at 4:49 PM, southernbeachguy wrote:

    I have had Sirus/XM radio for 5 years on 3 cars. I would never listen to regular radio again. Actually it can't be compared to regular radio because regular is only 1 station that fades in and out depending where you are. Sirus has 200 commercial free channels of whatever you want (Talk, POP, Jazz, Clasical, Latin, Country, Comedy, Opra, Martha, Sports (College & Pro) ....whatever cranks your tractor). I have driven from San Francisco to Atlanta and listened to the same channel the entire distance. As far as the value of the Company.....their revenue comes from North America, but soon they will expand to Europe, Asia and South America. You can't tell me that the value won't skyrocket.

    PS - look at Siri dooms name, he has to be paid by the regular Radio networks (NAB national associaton of Broadcasters) because they are losing their Butt to Sirus.

  • Report this Comment On November 05, 2009, at 11:03 AM, mikebz5 wrote:

    Care to update your expected Sub losses for 2009 Munoz? How about an apology article?


  • Report this Comment On November 05, 2009, at 11:52 AM, Southtexascowboy wrote:

    For years I used the wisdom of newsletters and analysts to make my investment decisions and more often than not my investments went south; the last few years I've used another type of wisdow---don't play by the rules--pick stocks that newsletters and analysts are trashing and guess what? I've done a lot better. Let's see where SIRI is in 6 months; I don't know about you but I'm betting the ranch on this stock.

  • Report this Comment On November 05, 2009, at 12:49 PM, jamf92 wrote:

    I do find it interesting that SIRI results are out now and MF has yet to post a new article. Usually they are Johnny on the spot to poopoo on SIRI so now that good news came out where are the MF articles? :)

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