NEW YORK ( TheStreet) -- I started covering SiriusXM (SIRI) last year with a March 2011 article. In the column, I described Apple's growing dominance in the smartphone space and how smartphones would impact consumer choices in content delivery.
As wireless Internet availability enters into the world of
(F), the need for nonterrestrial delivery will wither. As demand for satellite delivery diminishes, Sirius will reach a point that maintaining the system outweighs the additional revenue gained.
The new Cadillac XTS offers a Bose studio surround with Pandora (P) and Sirius via CUE. CUE allows up to 10 smartphone devices to connect via Bluetooth. Ford has similar technology including the ability to tag songs for later purchase in iTunes.I have written several times before and continue to believe the costs of maintaining the birds in the air will go on rising at a faster rate than revenue from those who demand it. The transition creates a challenge for Sirius and may result in several quarters of nonrecurring writedowns; however, the transition is not a reason to avoid Sirius. Barring a Black Swan event, the transition should not only proceed smoothly, but with predictability. More importantly for current investors, the transition is in the immediate future. Transitioning from satellite delivery to an Internet protocol method will not happen in a vacuum either. Sirius's new entry into the world of Google's (GOOG) TV demonstrates Sirius's commitment to moving forward into new delivery methods. The new app for Sirius was announced at Google's I/O developer conference in California last week. Liberty Media (LMCA) is likely to buy out Sirius long before the tipping point is reached, so a discussion about the death of satellite delivery may be a moot point. After Liberty's large purchase not long ago, I received comments about an article I wrote regarding valuation. Several comments stated the price of about $2.15 was now a floor in Sirius. I understood why some may naively believe the stock must be worth $2.15 a share. "After all, if Sirius was good enough for Liberty to buy at $2.15 it must be good enough for anyone." Unless you're in a position to take advantage of the net operating losses like Liberty may, Sirius begins to lose its appeal above $2.15 relative to the downside risk. At $3 a share, the company is worth $11.4 billion.
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