After hitting fresh four-year highs earlier this month, Sirius XM Radio (SIRI +0.00%) steps up for a very important quarterly report on Tuesday morning. There's a lot going on at the satellite-radio provider these days, and the market is asking questions.
Let's explore those questions and see whether any answers might be on the way.
1. Who will take over for Mel?
CEO Mel Karmazin announced his resignation last week. After years of watching over the transformation of Sirius XM into a profitable and sustainable media giant, he's moving on come February.
This wasn't exactly a surprise. Liberty Media (LMCA +0.00%) is closing in on majority control, and history shows that Karmazin isn't at his best if he's not the one calling all the shots.
Liberty Media will clearly have a say in who follows Karmazin in a few months, but he won't be an easy CEO to follow. Sirius XM has turned premium radio into a legitimate business, and if it ever succeeds in radio the way the way cable and satellite television companies succeeded in turning free TV into a subscription-based goldmine, Karmazin will be seen as the founding father.
2. Is Sirius XM going to raise guidance again?
It's been a good year for Sirius XM, and not just because one of the hottest stocks since bottoming out in 2009 is up another 55% in 2012.
Earlier this month, Sirius XM announced that it closed out the quarter ending in September with 445,921 more subscribers than it had three months earlier. Sirius XM began the year by projecting 1.3 million net additions, and that cautious tone made sense. The company was pushing through a 12% rate increase in January, so surely that would scare away some existing and potential customers. However, Sirius XM's been able to keep churn low and conversions high. Guidance on net subs being added in 2012 went from 1.3 million to 1.5 million to 1.6 million. Now it stands at 1.8 million.
Sirius XM only boosted its subscriber target when it preannounced its user numbers. A pretty good bet is that it beefs up its revenue guidance on Tuesday. It would also be a welcome update if the company juices up its forecast for adjusted EBITDA and free cash flow.
3. Is Sirius XM's Pandora killer still launching this year?
A major priority at Sirius XM this year has been to enhance its Web-based offerings. The company began rolling out smartphone apps three years ago -- and was offering online simulcasts before that -- but it remains largely a receiver-based media enjoyed mostly in cars.
In a move to get more non-drivers to pay up for standalone Internet subscriptions and to get existing receiver-based users to pay a few bucks more for Web access, Sirius XM introduced on-demand access to a lot of its proprietary content this summer. It's also been promising a customized streaming service -- taking on Pandora (P +0.00%) -- by the end of the year. That hasn't happened yet, but Sirius XM is pretty good about sticking to its targets.
Along the way, the market's getting a bit crowded. Clear Channel's iHeartRadio rolled out a Pandora-like service late last year, and Spotify followed suit earlier this year. Now the big boys in tech are moving in. Microsoft (MSFT 0.50%) introduced Xbox Music two weeks ago, and Pandora's stock has been taken a beating on reports that Apple (AAPL +0.33%) is negotiating with its major label partners to license a streaming service of its own.
The heightened competition will make it harder for Sirius XM to stand out. It would've been easy to market its commercial-free digital platform as a cost-effective option against Pandora's premium offering. Now it will be butting heads against bigger names.
Are the plans still on track? Is there any sense of how the service will try to differentiate itself from the crowded pool? We'll have to wait and see.
Running of the bulls
I recently put out a premium report on Sirius XM Radio, detailing the challenges and opportunities that await investors who are both long and short the dynamic media giant. A year of updates is also included with the report. Click here to check it out now.
