Sirius Blinks in the Satellite-Radio Wars

Has Howard Gone Underground?

One problem for anyone following or owning shares in satellite-radio companies is that more than a lion's share of their sales usually comes in the fourth quarter. A year ago, a very different scenario unfolded for Sirius.

Last year, fueled by unrelenting media coverage of Howard Stern's imminent arrival, shoppers made Sirius receivers a very hot Christmas item. More than 500,000 units -- if you could even find one -- were sold in just the final 10 days of the quarter. This year has not been "all Howard, all the time." In fact, Stern has almost been a no-show, at least so far. One wonders why he hasn't been front and center if he is such a big draw and in light of his big pay package. He certainly helped enhance Sirius' brand awareness last year, but it's hard to know why he isn't being used now.

Holiday advertising also doesn't appear to be optimally used, as promotions for XM Satellite Radio and Sirius are hard to find in the papers. I scanned the Sunday newspaper preprints for CompUSA, Best Buy (BBY Quote) and Circuit City (CC Quote), and the ads show the two competitors next to each other, with some of the more popular channels that each features. The ads are also buried in the inside pages where you have to look for them.

We also know that Thanksgiving was early this year, adding one extra week to the Christmas selling season. It's hard to know if consumers are primarily interested in the biggest and best HDTVs they can afford to lug home, or if this is just going to be a soft holiday season overall. It's also possible that folks haven't started shopping yet -- at least Sirius can hope!

Put on a Happy Face

Always trying to put the best spin on any situation, Sirius CEO Mel Karmazin's press release pointed out that even at the low end of the range, total new Sirius subscribers will grow this year by 80% to 85%. The company is still hopeful that it will turn free-cash-flow positive after capital expenditures as soon as the current quarter. That also is backpedaling from previous, more optimistic goals that Sirius would get there before year-end.