Sirius XM Is Negotiating in Public

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Sirius XM Radio (NASDAQ: SIRI  ) closed out the year with 25.56 million subscribers, a slight dip from the 25.82 million accounts it was watching over just three months earlier. This is the satellite radio provider's first sequential dip in subs in more than four years.

There's no reason to panic. In fact, the update is actually good news. Investors were already braced for a decline when Sirius XM's forecast in October called for 1.6 million net subscriber additions for all of 2013 after it had already nabbed 1.68 million net adds through the first nine months of the year. It closed out 2013 with 1.66 million more subscribers than it had when the year began. Sirius XM exceeded its guidance.

More important for the bean counters, the actual number of subscribers may have slipped sequentially, but the quarter was solid in terms of folks actually paying for the service. Sirius XM's count of self-pay accounts increased sequentially to top 21 million members.

Growth will continue. Sirius XM is sticking to its earlier 2014 guidance for revenue to top $4 billion and adjusted EBITDA to clock in at $1.38 billion. It's also initiating its outlook for 1.25 million net subscriber additions, and $1.1 billion in free cash flow.

This all is happening just as Liberty Media (NASDAQ: LMCA  ) went public over the weekend with plans to absorb all of Sirius XM. Investors were no doubt disappointed in the meager premium that Liberty Media was willing to pay to take over the 49% of the company that it doesn't already own, but investors knew the risks of buying into a company where a shrewd media mogul has majority control.

Sirius XM's board, or its CEO, can't publicly bellyache for more than the initial 3% premium. The time for complaining about Liberty Media's meddling was before regulators cleared the path for John Malone's eclectic media empire to take command of the company. However, Sirius XM can do things like it did with yesterday's update -- to remind investors that its prospects continue to improve -- and to strategically negotiate in public. 

It may not be enough. Critics will argue that, with subscriber growth decelerating -- Sirius XM sees its subscriber count growing by less than 5% this year -- it's the ideal time to punch out and be part of a larger media giant. However, that also ignores this month's subscription rate plan increase, and the average revenue per user that was already inching higher.

Sirius XM has historically flowed freely with press releases touting its accomplishments. Don't be surprised if we see more of that in the near term. Whether the good news encourages Liberty Media to sweeten its offer or stirs up shareholders to hold out for more, it's ultimately in the best interest of Sirius XM investors.

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Read/Post Comments (4) | Recommend This Article (0)

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 January 08, 2014, at 4:25 PM, bottomfisherman wrote:

    I fail to see how you and others keep painting a picture of how good a deal this is for SIRI shareholders. A miniscule premium is being offered for a company with tremendous future earnings potential, subs are growing, cash flow is huge, venturing into telemantics.... Siri shareholders will also be converted to Liberty class C stock and will then be holders of a 39 percent stake in that company with no voting rights. A good deal would be for a better conversion rate or stock with voting rights not what is currently being offered.

  • Report this Comment On January 08, 2014, at 6:34 PM, sirifair6 wrote:

    I completely agree with bottomfisherman. Who is really negotiating in public is liberty media with its nonsense about how much siri needs them.

    Sirius XM needs liberty as much as we need cholesterol in our blood stream. Sirius XM is a focused business with may be not glamorous but great future with its cash flow having a 99% chance to more than double in five years to over $2B. If telematics business led by the Agero unit does take off, as most of siri investors expect, we may be talking about huge returns within this decade.

    Who is truly publicly negotiating is Maffei et al. with their CNBC buddies like Faber and Cramer touting the deal as a blessing to siri shareholders. These people have no shame. This is a profoundly lousy deal for siri shareholders even with a good price because liberty will be able to suck siri until it starts bleeding. As to the offer, Nader is right calling it ludicrous.

  • Report this Comment On January 08, 2014, at 10:53 PM, Jimbobjones2 wrote:

    Actually sirifair6, cholesterol is very important for our body. Most experts believe that cholesterol works as a antioxidant that cleans up free-radicals that would otherwise damage our mitochondria. There are people who have tons of cholesterol floating in their bloodstream yet show no signs of heart disease. And HDL is the best cholesterol to have cause those who have a high rate of HDL (over 60mm) have fewer heart attacks then those with less then 40mm of HDL. So, don't criticize or give cholesterol a bad name, its purpose is to keep you alive so you can continue to make comments about Sirius on MF or SA. Thank You

  • Report this Comment On January 09, 2014, at 4:13 PM, Guggerpaul wrote:

    This is nothing more then an attempt to cheat Siri investors who have held in there through thick and thin, The sub numbers have been manipulated. first they changed the way trial subs are counted then they start giving new car buyers a 1 year free trial. an existing sub buys a new car we loose a sub for a whole year. His trade in sits on a lot for a month then the new buyer gets 3 months free trial this will take some time to work through but when it does sub counts will fly through the roof in the mean time it gives the appearance that the sub's are slowing. This was orchestrated for this attempted take over. my advice is to buy or if you already own buy more and vote "NO"

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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Related Tickers

8/27/2015 3:19 PM
LMCA $36.68 Up +0.53 +1.47%
Liberty Media CAPS Rating: ****
SIRI $3.77 Up +0.05 +1.36%
Sirius XM Radio CAPS Rating: ***