This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sirius' Hopes Keep Slipping Away

Every time I look at this company, I can hear Walter Schloss in his talk at Columbia University. "I don't like debt," the legendary investor repeated throughout the speech. Sirius on the other hand loves debt, to the tune of over $3 billion. Liberty Media stepped in earlier this year with a $530 million cash infusion. Sirius has repaid the loan from Liberty, but it had to dilute shareholders' equity by 40% just to stay alive. Given the CCC rating on its outstanding debt, it is not impossible that it may approach the precipice again.

When I go through the actual earnings release, I see a lot not to like. Over 3 million subscribers chose not to renew their subscription. While total subscriptions were up about 180,000 from the second quarter, I suspect that the number would have fallen without Cash for Clunkers in the quarter. On a year-over-year basis, the total subscriber count was down. Interest expense was up about 60%. Long-term debt outstanding inched up in the quarter as well. All the company accomplished was to extend the day of reckoning, in my opinion.

To believe that this stock has long-term value, you have to think that the economy gets better sooner rather than later. The company is heavily dependent on auto sales, and I suspect that Cash for Clunkers bought forward an enormous amount of vehicle demand. If I am right, then the forecasts for 2010 car sales are far too optimistic. Consumers are cutting back across the board, and satellite radio is the ultimate discretionary expense. Nobody needs to listen to Howard Stern. In most markets you can hear ballgames on free radio, and NPR and the all-news stations are a viable alternative to laying out subscription fees for talk shows. Individuals who are worried about their jobs are going to be very content with free radio content.

The combination of a weak economy, competing technologies and way too much debt will doom this company, in my opinion. The companies that have other media technology are far better financed than Sirius, and that will eventually be the end of this company.

Eventually somebody, most likely John Malone, ends up with a very nice collection of satellites bought cheaply during the bankruptcy.
At the time of publication, Melvin had no positions in the stocks mentioned, although positions may change at any time.

Tim Melvin is a writer from Stevensville, Maryland, who spent 20 years a stockbroker, the last 15 as a Vice President of Investments with a regional firm in the Mid Atlantic area. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Melvin appreciates your feedback; click here to send him an email.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SIRI $3.92 1.00%
AAPL $92.69 -0.59%
FB $119.49 1.40%
GOOG $711.11 1.40%
TSLA $214.84 1.60%


Chart of I:DJI
DOW 17,740.63 +79.92 0.45%
S&P 500 2,057.14 +6.51 0.32%
NASDAQ 4,736.1550 +19.0610 0.40%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs