Cost Question Orbits Sirius Satellite

As Sirius Satellite Radio (SIRI Quote) debates the launch of another satellite, investors mull the costs.

Already burning through piles of cash to fund its money-losing subscription radio business, Sirius now faces a big capital spending decision. The New York-based pay radio shop is considering what to do with its fourth satellite, which currently sits on the ground serving as a backup in the event of trouble with any of its three orbiting satellites.

The company is weighing whether or not to launch the satellite early in an effort to boost its signal coverage, Bear Stearns analyst Bob Peck said in a research note Wednesday.

The debate centers on where the new satellite would orbit, says Peck. He adds that Sirius could choose a so-called geostationary orbit -- one that would fix the satellite in relation to one spot on the earth -- rather than the elliptical orbit that its other satellites use. But the new orbit would demand the reconfiguration of some gear.

That job could take most of a year and costs as much as $50 million, Peck estimates. Though Peck says launching the fourth satellite is a good move, he points out that it will put pressure on the company to raise more cash. Peck has a neutral rating on the stock.

Both Sirius and sole rival XM Satellite Radio (XMSR Quote) have caught on with investors who have been willing to ignore big costs and concentrate on growth as satellite radio attempts to reach the consumer mass market. But critics have long charged that the companies are risky investments that require continual financing until some distant date when the operations turn profitable.

There are two choices, says April Horace, an analyst with Hoefer & Arnett. Sirius could send the $130 million satellite up to boost signal power. Or it could instead beef up repeaters on the ground.