Win Sirius XM's Billions

• Report this Comment On July 21, 2012, at 1:14 AM, cheeby wrote:

  Still bullish but don’t own shares yourself eh? Once in a while I’d like to receive advice from someone who actually puts his own money where his mouth is…

• Report this Comment On July 21, 2012, at 8:08 AM, doubting wrote:

  Rick,

  You are right that the company will be "filthy" cash rich and it will use the cash for stock buybacks. I suspect that they may even be more aggressive in the beginning while the stcok price is ridiculously low.

  Where I disagree is that they will be launching satellites every few years. As you know, satellite life span is about 15 years. Sirius will need to start replacing satellites in early 2020s, with first meaningful expenses beginning 2018. So, they have net 5.5 years with virtually no tax due to NOLs before any considerable satellite costs. Also, have in mind that they will reduce the number of satellites twofold from 8 to 4, with overall launch and build expenses about $1.6B conservatively.

  Let us make a few reasonable assumptions based on indicative trends.

  1. Odds are very strong that siri will be adding about 2M customers annually in the next five years.

  2. Siri will refinance most of its debt at about 6% or 7% rate (it is obvious that siri will be come credit worthy in the next 12 months due to its stellar performance) and will save about $120M on interest.

  3. With expected margins, the company can generate close to $10B in the next five years, of which it can safely spend $8B on debt repurchase.

  As the result, siri may remove over 2B shares from the market. By 2017 the company will most likely be valued over $40B with fair share price at $10 or higher. This assumption does not account for market HYPE.

• Report this Comment On July 21, 2012, at 11:55 PM, BrickJohnson wrote:

  Shares repurchased will not be retired and will go to executive compensation by which process rich will get richer and investors will get jack.

• Report this Comment On July 23, 2012, at 12:31 PM, kmacattack wrote:

  I think another possibility for wise use of the cash accumulation would be to add a modest dividend, possibly in the 3 percent range. Although I've never bought a lot of stock due to dividends, if the stock price is stable or rising, which SIRI has been for the last 3 years despite a few bumps in the road, I think a dividend would attract some large institutional investors and create even more demand for shares. SIRI is now to the point that they are "over the hump" and with every new subscriber is adding to their gross dollar and percentage of profit margins. There are about 20 million idle SIRI receivers, with a large percentage of those sitting on the lots of car dealerships around the country. The aggressive policy as of late of working in tandem with these "branded" dealers such as Ford, GM, etc. along with mega used dealer Car Max and others is a great way to increase the subscriber base at a very low cost. There are a lot of ways for SIRI to make money. I've wondered it they had the availability on the existing satellites to add Internet via satellite, or possibly Ala Carte TV programming, such as Premium packages such as HBO, Showtime, etc. A lot of people like myself would jump at the chance to "cut the cable" and purchase Internet or TV broadcasts from SIRI. Even in a somewhat flat economy, SIRI has been growing by leaps and bounds, and it's no wonder. They have something which no one else has been able to duplicate. SIRI has the absolute best content available, and content is KING.

• Report this Comment On July 23, 2012, at 12:34 PM, kmacattack wrote:

  Congratulations on another great, well thought out article with theories backed by solid factual information. Well done, Rick.

Add your comment.