Sirius/XM Stock Heading To Channel Zero

Despite my wife’s contention that there’s never anything on and that the the Oprah channel’s Dr. Oz show is poorly scheduled, I generally enjoy my Sirius subscription, which now comes with extra XM. As I’ve noted before, Phoenix radio is about as bad as could be imagined and I’m generally too lazy to actually bring discs into the car to listen to, so the subscription seems like a decent deal. However, given the company’s recent financial news, I may end up regretting paying for six months in advance.

With satellite radio’s patron, the car industry, collapsing, things aren’t looking good for the recently merged Sirius/XM: The stock’s at 14 cents and industry types are predicting it could fall further. That seems bad.

At least one financial analyst is now even comfortable being quoted using the “B” word — bankruptcy.

CNNMoney: “The outlook for Sirius XM has grown increasingly worrisome and at the current time looks bleak,” said Frederick Moran, an analyst with Stanford Group. “At this point, you have to question whether Sirius XM will survive 2009 in its current structure. There is a likelihood that it could enter bankruptcy.”

As my colleague Henry Blodget said Tuesday, yes, Sirius could go to zero. (We’ve updated the numbers as Sirius’ market cap has had $200 million wiped off in the last two days.)

Mel Karmazin’s company currently has an equity market capitalization (value of the stock) of $455 million. It also $360 million of cash and $3.3 billion of debt, so its “enterprise value”–the implied value of the business itself–is about $3.5 billion. The only thing that has to happen for Sirius (SIRI) stock to go to zero is for the market to conclude that the company is worth less than $3 billion. This would wipe out the company’s stock value, leaving the company in the hands of the debt-holders.

Why might the market soon conclude that Sirius is worth less than $3 billion? Because it’s running out of cash. In the first 9 months of this year, Sirius had negative free cash flow (cash from operations – capex) of $300 million. $360 million of cash won’t last long at that burn rate.

There wasn’t any specific news sending the stock into freefall, although the post-channel merger buzz for the company has been miserable. I don’t know if I’ve noticed any particular difference in each channel’s playlist–this is possibly because most channels seems to hang on to their Sirius staff at the expense of XM’s personnel–but no satellite radio subscriber I know has described the change as positive. Even if there wasn’t a specific channel a listener mourned the loss of, the entire “change under the cloak of night” channel shift was shady, at best. If people are paying for your product, would it hurt to let them know more than two seconds in advance that a significant change was coming? Instead, I’m sure the company’s customer service lines were flooded with complaints and probably cancellations as well. If XM Sirius can survive their stock price and apparently one billion dollars in debt owed this year (ouch), I’ll be happy to hang around and suffer through XMU’s current obsession with Passion Pit. But I’m not optimistic.

Sirius XM Keeps Tanking: Now 14 Cents [Silicon Alley Insider]

  • Dead Air ummm Dead Air

    As an XM sub. since 2001 I have to say…the content is worse. I never quite understood how the weaker company essentially took over the merger, but it happened. All I know is that I’m getting more content that I don’t care about (if I wanted Margaritaville and E Street radio I’d have been a Sirius subscriber), but the PD at the stations I do listen to suddenly got blander. I’m not sure what the new station names are, but XMU used to actually play some stuff from bands I never heard of, and now the new one classifies Kings of Leon, old Stills, and Arcade Fire as “indie.” Sure, they are a staple of college rock and should be on the channel, but I’m yet to hear anything new on the SirusXM College station, which is a problem.

    The 80′s newwave/alternative staion used to play deep cuts from popular bands and obscure bands alike. Now it’s just Blondie and Clash hits.

    I don’t want to be that “if it’s popular it sucks guy.” Those songs acts are successful because they are good. But when I’m paying for a service, they should cater with more specific content that I won’t find in any East Village bar.

    And don’t even get me started on how poor the PAD data is.

  • DocStrange

    @Dead Air ummm Dead Air: Oh, I cancelled my XM subscription after they dismantled XMU (my local alternative station and various college stations blend old and new indie rock better than Sirius XMU does) and turned Fred into First Wave (which is where I first heard bands like Hunters & Collectors, Altered Images and The Church). I mean, Music Choice’s Retroactive station has essentially turned into what Fred was.

    The one good thing I was looking forward to from Sirius, the freeform Sirius Disorder, was replaced by something that was not Sirius Disorder, but an AAA station.

    So now i’m just stuck with my local radio stations and the Music Choice programming my cable company has. And it’s actually alot better than what I previously had (except that the Music Choice Alternative station tends to play alot of Tokio Hotel).

  • Audif Jackson Winters III

    I’ve always liked First Wave (particularly the Saturday Night Safety Dance mix show) and LOC. I dunno, maybe I’m “bland.”

  • SAShepherd

    6 months in advance? I renewed (automatically) my XM for another year, like, literally a day after the merger went live.

    I should note here that unless the biz goes belly up, I’m actually going to be on the Kids Place Live channel as a reporter of some sort (no, I don’t have one of those My Old Kentucky Blog deals going), so take these comments with the appropriate grain of salt.

    I do think there’s some amplification of the general dissatisfaction because if you were OK with 8 of the 10 stations but you lost two of your favorites, you’re not going to take to the web to shout from the rooftops to say, “Hey! I still like 80% of my stations!”

    Which isn’t to say that 2 of my 3 most-listened-to stations (XMU and POTUS) didn’t get makeovers of some sort. And although the third — Kids Stuff Live (sorry, semi-professional obligation — was the old XM channel rebranded, you should hear the complaints of the parents. Hell hath no fury like a 4-year-old’s parent spurned…

    What it suggests is that people signed up for particular stations — not a range of stations. If you’re getting rid of, say, 30% of those stations (or revamping them unrecognizably), then perhaps it’s not unsurprising that they’ll get hammered by cancellations.

    Oh, and, yeah, given that they posted the channel lineup in a full-page USA Today ad the week prior to the switch, they could’ve at least sent it to their subscribers, too.

  • Captain Wrong

    One of my most listened to stations (Backspin) disappeared entirely. Considering there is nothing on that channel now, I find it kind of surprising and frustrating.

    As a Sirus guy (that’s what came with the car) I was hoping some of the good of XM would rub off. Yeah, right. When behemoths merge, does the good of both side ever merge?

    Sorry for you XM people who now know the joy of the Sirus Clear Channel-esque playlists. Sigh.

  • LiquidHeaven

    It’s been amusing that both sides of the subscribership have said the content is worse now. I too felt I missed LOC at first but the programming on Sirius XM has gotten significantly better over the past week it feels like.

    I’m enjoying the channel and have no complaints. Sure backspin was dropped but I’m really only paying for Howard and the indie station.

    I’m still happy.

  • Anonymous

    @LiquidHeaven: I agree, I only listened to Howard and LOC before. I got sick of hearing Argent’s “Hold Your Head Up” for the 100th time on Classic Vinyl.

    I canceled, but only cause I sold my car. Can’t say I miss either.

  • so1omon

    I heard a DJ on XMU the other day introduce a “brand new band” called Love Is All. Yup… Love Is All is “brand new” apparently.

    Even more funny is that the first time I ever heard Love Is All was on the old XMU.

  • Anonymous

    I am a sirius guy. The only reason I got it was Stern. XM had way better music. I even complained when the merger happened. 1st we both lost a pure punk channel. THere are like 5 metal channels and like 5 rap channels but no pure punk channel. What really pisses me off is that there is a Led Zepplin channel. Why? they only have 9 records and they are played 17 hours a day un regular radio and a bunch on the other channels on sirius.