Sirius XM to Go Global?

Is Sirius XM poised to go Global? The company itself is mum about the prospect, but some analysts say Sirius XM could well go international -- the question is when.
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NEW YORK (TheStreet) -- Ever since Liberty Media (LCAPA) -- which bought 40% of Sirius XM (SIRI) - Get Report in 2009 and rescued the company from bankruptcy -- bought up debt of international satellite radio operator WorldSpace through a subsidiary, speculation has run rampant that perhaps Sirius and WorldSpace could work to bring Sirius XM's programming abroad.

The talk has persisted even as talks between a Liberty subsidiary and WorldSpace to buy the latter's assets fizzled in March.

And while Sirius XM hasn't responded to


request for comment about the ongoing speculation, several analysts who spoke with us believe that Sirius XM could carry out the feat.

Whether it


to, or not, is another question entirely.

"The business is seriously unprofitable at this point it," David Trainer, president of Nashville-based research firm New Constructs said. Thus, notes Trainer, in order for such an undertaking to be carried out, Sirius XM "would require a lot of additional capital."

Trainer, it's worth noting, holds a "dangerous" rating on the stock. And by his way of thinking, although things might be getting better for Sirius XM, "the upside has already been baked into the stock price.... We think that its valuation is stretched already."

Trainer argues that Sirius XM's quarterly earnings reports contain accounting distortions that doesn't show the true picture of just how unprofitable this company is.

Matthew Harrigan of Wunderlich Securities, on the other hand, thinks that Sirius XM "would have the capital latitude" within two to three years to undertake an international launch.

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Still, Harrigan adds, "I'd say there's a fair possibility they'd stay in the U.S" due to the political risks Sirius XM could face in the international markets. Furthermore, no international market would be as large-scale as the U.S. in terms of auto distribution channels for satellite radio services like Sirius XM, Harrigan notes.

Craig Hodges of the Hodges Fund, which owns 10 million Sirius XM shares -- a top-20 position for Hodges -- said he'd be disappointed if Sirius XM wasn't in the position to expand overseas two years from now. "The economies of scale are tremendous on that business if they can do it right."

However, Hodges adds: "I would think that they would need to have some pretty good market share -- a pretty good foothold here in the United States -- before they started going in a bunch of different kind of directions."

Hodges says he believes that this is the time to be buying Sirius XM, as the company is "crossing from losses to profit," and adds that company CEO Mel Karmazin is "a guy that's run the ship right."

But should he run that ship into international waters? As they say in the radio business: stay tuned.bottom

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-- Reported by Andrea Tse in New York


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