This Week in Sirius XM Radio

Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  ) slipped this week, falling 3.2% to close at $3.58. The media darling's drop was worse than the Nasdaq's 1.9% decline on the week.

There was more going on beyond the share-price gyrations, though. Sirius XM found itself having to tackle two legal matters, and Nokia (NYSE: NOK  ) took another step in the telematics market.

Let's take a closer look.

I'll see you in court
The week kicked off with music royalty collector SoundExchange going after Sirius XM for the way it calculates the gross revenue it uses in determining how much it has to pay. The fast-growing media company paid 8% of its related revenue last year and is coughing up 9% this year. That figure will balloon to 11% by 2017.

The definition of "gross" revenue is the key here. What's the value of the non-music content Sirius XM plays? How do you allocate the different pricing plans to what the music makers deserve? What about the pre-1972 recordings that are covered? There are a lot of gray areas here, but SoundExchange is seeking compensatory damages that could be more than $100 million.

Another potential legal battle is starting to take shape, as some shareholders are trying to get a Delaware Chancery Court judge to explore the circumstances behind the 2009 deal that granted Liberty Media (NASDAQ: LMCA  ) a 40% preferred-share stake in Sirius XM. That case faces a higher hurdle to clear, but it bears watching. 

The Finnish line
Even before Sirius XM agreed to pay $530 million for Agero's connected vehicle services business two weeks ago, the satellite-radio star has been staking a bigger role in the promising telematics market. It's for that reason that shareholders now need to keep an eye on developments in that field.

On that front, Nokia introduced Here Auto on Friday. Nokia may seem to be struggling to regain its former glory in mobile, but that's no reason to take Here Auto lightly. When it acquired NAVTEQ six years ago, Nokia became the top dog in automotive mapping data. Here Auto, a connected car system, is a logical extension. 

Nokia and Sirius XM make odd enemies, and they'll be butting heads here sooner rather than later.

A Sirius future
It was an interesting week for Sirius XM. The new week isn't likely to be dull.

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  • Report this Comment On August 31, 2013, at 8:56 AM, lee654 wrote:

    Agree, long & will buy more next wk. Nokia !

  • Report this Comment On August 31, 2013, at 10:07 AM, DZPM wrote:

    AT&T was the first carrier in the country to launch Nokia’s first LTE-based Window Smartphone, Nokia Lumina, 900. Thus, Lumina 1020 with Lumina 925, AT&T will have all Lumina flagship phones in its portfolio.

    The current financial condition of NOK is very strong as evidenced by the large number of positive fundamental factors. The stock represents a good value when compared to other stocks in its industry group and appears likely to experience further price appreciation. Operating cash flow remains positive. Looking forward, the analyst consensus forecast for revenue and earnings for the next two quarters is expected to show improvement versus the prior quarter. Price momentum is strong and the stock has outperformed the market when compared to the S&P 500. As long as the positive fundamental outlook does not change, this stock should be a strong performer over the intermediate term.

    The Price/Cash Flow ratio is 1.27. A low ratio shows a strong ability to generate cash and reflects well on a company’s stock price and liquidity. The average Price/Cash Flow ratio for this Industry Group (Comm. Equip.) is 24.88.

    Leading Price/Earnings (P/E) Ratio / Earnings Growth Rate) ratio is 0.52. This ratio is the Leading P/E ratio divided by expected per share earnings growth over the coming year. A PEG ratio greater than 1 indicates a stock may be overvalued or the market expects future Earnings Per Share (EPS) to be greater than the EPS consensus. The average PEG ratio for this Industry Group (Comm. Equip.) is 1.09.

    NOK's PRVit score is at the 84th percentile of all firms in its industry, which leads to a recommendation to BUY. NOK is more attractively priced in relation to its true value than well over half of the stocks in its industry. Nokia is nothing but BUY…BUY…Buy I am long but 10,000 today.Yes Go NOK Go!

    Nokia’s acquisition of the remaining 50% stake in the erstwhile Nokia Siemens Networks (NSN) from Siemens (SI) earlier this month. NSN is in the midst of an ongoing turnaround that has seen it return to profit and generate cash flows on a consistent basis. Having full control of this entity should therefore give Nokia full access to its cash to not only meet the needs of its devices business but also to pay off debtors. At the end of the June quarter, the Nokia Group had about euro 4 billion of net cash on its books. NSN’s acquisition at euro 1.7 billion implies that Nokia’s net cash position will reduce by an equivalent amount, but will also give it the rest 50% of a business that, by our estimates, is a lot more valuable. We estimate that the networks business accounted for more than 35% of our $4.85 price estimate for Nokia before the acquisition. A bulk of NSN’s value is due to the company’s ongoing restructuring that has strengthened its focus on wireless as well as improved margins and cash flows significantly. The restructuring is in fact going so well for NSN that it now expects euro 1.5 billion in cash savings by the end of the year as compared to 2011-end – almost 50% higher than anticipated earlier.

    60% upside due to NSN acquisition Since the acquisition was completed only recently and Nokia has not yet released the consolidated results, we haven’t been able to account for the impact on the company’s fair value. Still, taking the results at the end of last quarter as a starting point, we can make reasonable assumptions to arrive at a fair price estimate for the company’s stock. Assuming that Nokia neither generates nor loses cash during this quarter, the only impact on its net cash balance is the debt that it takes on to pay Siemens. A decline of euro 1.7 billion in net cash balance will have a negative impact of about $0.60 per share on Nokia’s value. Most of this is however offset by Nokia’s higher ownership stake in NSN, which is now double the earlier 50%. We estimate that this increases the near-term cash flow attributable to Nokia’s shareholders by about euro 600-700 million and that towards the end of our forecast period (2020) by about euro 500 million, adding about $1.75 per share worth of value to the stock. For reference, NSN generated about euro 1.4 billion in free cash flow last year. The long-term decrease in cash generation is mostly driven by a reduction in NSN’s ability to manage its working capital for cash going forward as the restructuring comes to an end, offset to an extent by margins stabilizing towards the high-end. Feeding these estimates into our model, we arrive at a net upside of $1.15 per share ($1.75-$0.6). This translates into a fair price estimate of $6 for Nokia, about 60% higher than the current market price.

  • Report this Comment On August 31, 2013, at 1:15 PM, rusty7333 wrote:

    Sirius Radio has one asset that they are letting slip away, Howard Stern. They reengaged on his bonus that was based on increased revenue from all sources. So now he is down to 2 days a week. The rest of the service is not that great. It is stuff that you can get for free or little cost if you have cel/internet service. I would hold my nose and run.

  • Report this Comment On September 01, 2013, at 5:04 PM, Austin77478 wrote:

    rusty7333-

    Lol at your scare tactics....

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