Friday, June 5, 2009

Siriusly good times?

A BusinessWeek post ponders a hypothesis:

Satellite broadcaster Sirius XM Radio (SIRI) is highly dependent on GM and other carmakers for new subscribers, so is it in big trouble now, too?

Aaron Pressman of BusinessWeek references the opinion of Tyler Savery at (disclosure: Savery owns shares of Sirius XM), who doesn't necessarily see it that way. Excerpts:

Yes, GM is Sirius biggest supplier of subscribers, but they are also a huge expense to the company. Each subscriber requires an investment by Sirius XM radio. This investment, referred to as Subscriber Acquisition Cost, is an expense to the company in the short term, in hopes that that investment will pay for itself in the long term....So while a slowdown in sales will hurt the sub number, a slow down in production will mean less costs....

[D]ealerships have been on news cast after news cast stating that the deals on GM brand cars will be attractive. This could actually serve to boost GM sales in the short term, and thus the impact to sub numbers (from a GM standpoint) may not be as bleak as it would have been....

Now, more than ever before, the bottom line is what everyone is looking at. Fewer installations will help the bottom line because those 1 to 3 year SAC investments will be fewer. This keeps cash in the coffers of Sirius XM, and that, in this economy, is a good thing.

Not sure if the market agrees. In the last month, SIRI's high was $0.53 on May 6. The June 5 price was $0.34, down from $0.35 on June 1.

Read the whole Sirius Buzz piece here.
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