SiriusBuzz Radio will broadcast tonight, July 2, 2009 at 9:00 PM eastern. Join Tyler and Charles as we break down the happenings in satellite radio, discuss the latest news, and take a look at what the future holds. SiriusBuzz Radio comes to you live, and callers are always welcomed. You can join the action by calling 347-945-7995.
Sirius XM Radio can celebrate a successful launch of their newest satellite (FM-5), but as yet, there are still several steps that need to happen before full control is turned over to the company. With the riskiest part of the launch behind them, the company, as well as investors can breathe a bit easier knowing that they now have one of the most powerful satellites ever built safely in orbit.
The new satellite is not yet in it’s final location, and there will be maneuvers to accomplish the finalized orbit during the first two weeks in July. Once in place, the nine meter reflector deployment will happen, and then the company can begin testing of the functionality. The functionality testing should happen during the final two weeks of July, and it can be anticipated that Sirius XM will take control of the satellite in early August.
The newest satellite will not only improve the signal reception for Sirius receivers, but also carries the capability to do more functions than the satellites in the existing constellation. This satellite will be in geostationary orbit, meaning that it will remain in a fixed position in the sky. The three satellites already in orbit are in a geosynchronous orbit, running a virtual figure eight pattern over North and South America.
Celebration for the fact that the satellite is in orbit is good, but investors should remember that there are a lot of moving parts and tests that need to be completed prior to popping the cork on the champagne.
Position: Long Sirius XM
Sirius XM announced today that Mel Karmazin’s employment agreement has been extended through December 31, 2012. The new deal gives Mr. Karmazin a raise in his base salary, as well as the options to buy 120 million shares at a price of $0.43 per share.
Karmazin, a long time radio industry guy, joined Sirius Satellite Radio in 2004. His deal was scheduled to expire in the fall of this year and could have been a potential worry for the street. Over his tenure, Mel was able to bring about a merger with XM, but has also been at the helm during a period where shareholder value has eroded. The new deal will likely be met with mixed emotions, as some have been critical of the share price as well as the merger.
The new options that Mel received will once again give him incentive to bring the share price of the stock upward. Karmazin recently donated back the options he had from the previous deal about a month ago, in a move that helped offset newly issued shares. Mel’s old options were so far under water that they would likely never provide the incentive for him to exercise his rights to the options. Instead, Mel had done a few purchases of stock on the open market.
The Sirius XM app is out, and is a very popular download. It ranks among the most frequently downloaded apps not only in the music category, but overall. The app was an instant success despite the absence of Howard Stern, but the popularity has slipped in recent days, falling behind apps such as Paper Toss and a pinball game titled Wild West.
So how can Sirius XM make the app more of a success? In my opinion, they should make it more interactive. This weekend I found myself listening to Boneyard (Sirius 19 and XM 53). Boneyard is doing a countdown of Rush songs. The countdown was formulated by fan emails regarding the popularity Rush songs. I learned of this by cross promotion on Classic Rewind, and found myself tuning into Boneyard to catch songs from what is one of my favorite bands. This got me thinking.
Sirius XM Radio announced today that XM Satellite Radio (a unit of the company) sold $525 million in four-year senior secured notes. The move, which dealt with more money than originally anticipated will improve cash flow, is at a lower interest rate, and does away with quarter amortization payments that the company was having to make.
The additional funds above and beyond what was announced last week will now take care of all of the Liberty Media loan to XM which was at an interest rate of 15%. The new facility improves that rate to 11.25% with a yield of 12.85%. The original $250 million that Liberty loaned to Sirius will still exist. This move cleans up the XM books moving forward and allows Sirius XM to better the overall balance sheet and improve cash flow. JP Morgan facilitated the deal.
Sirius XM stock traded higher on the news.
Position - Long Sirius XM, No Position Liberty Media
It was just a few months ago that the old fauxs turned friends, Howard Stern and Rosie O’Donnell first made nice on the Sirius XM airwaves and now it looks like their new found friendship will be put to the test in a little friendly morning show host competition.
Rosie Radio is set to launch this fall and air Monday - Friday from 10am -12pm ET on Sirius XM Stars, Sirius ch.102 and XM ch.155. Rosie Radio is said to be a daily, two-hour talk show on which she will blend her many passions and interests - an eclectic mix of humor, pop culture and serious conversation.
“Rosie O’Donnell is a powerful, dynamic and entertaining voice and now you can only get her on Sirius XM,” said Scott Greenstein, President and Chief Content Officer, Sirius XM Radio. “Rosie’s millions of fans will hear her as they never have before, and have the chance to call in and talk to her and her intriguing guests. Rosie Radio will entertain, inform, surprise and delight.”
Now that she is “exclusively” on Sirius XM, does this mean her fans will no longer be able to see and hear her via the infamous Roise blog, where she has been known for her outspoken written and video rants over the years? At the time of this writing there was curiously no mention of her move to Sirius XM… I expected to see a maniacal video blog at the very least to let her fans know where they could catch her next, maybe it is coming soon.
In an interesting turn of events, it is quite possible that an advertisement read on the air by Howard Stern himself could pave the way for Sirius XM subscribers to catch his show on Apple iPhones and the iPod Touch. Howard, unlike other high profile talent on Sirius XM, has not been touting the new Sirius XM app, but he has been doing live reads for another iPhone app for LogMeIn Ignition.
LogMeIn is an application that allows iPhone and iPod Touch users to access their home or office computer from their devices. In the ad for LogMeIn Ignition, Howard touts, “If it’s on your computer, it’s on your iPhone.”
In theory, a consumer who downloads the LogMeIn Ignition app onto their iPhone has complete and unfettered access to their home computer through the device. A look at the LogMeIn Ignition website reveals that those that upgrade to the LogMeIn PRO function will allow users key features that should make listening to Howard 100/101, as well as other content not available through the iPhone app, very possible.
Investors in Sirius XM have been waiting for good news from the analysts, and it appears that at least some firms have faith that satellite radio will prosper in the weeks and months ahead. Barrington Research has upgraded SIRI to Outperform with a $0.70 price target.
In a note issued today, Barrington highlights that the woes of the merger process and credit market took their toll on the equity, but that things are beginning to change, and that perhaps brighter days are ahead for satellite radio investors.
Barrington believes that investors should consider several core fundamental issues:
“Now it appears there will be an added fee below the line labeled a Royalty Recovery fee permitted under terms of the FCC agreement to reflect both the higher level of royalty rates now in effect, as well as a catch-up of rate increases since the date the merger was announced. This particular fee is likely to provide meaningful additional dollars, though the phase-in will take several quarters. New initiatives like the iPhone App are being very well received. However, the revenue opportunity may be less important than the attention and added visibility it has provided to Sirius XM and the greater usage of the service it could spur.”
Barrington calculates what could be significant upside from current levels to $0.70 (post dilution), based on 2010 estimates and to $1.30 based on 2011 estimates. Given this upside, they now rate SIRI as an OUTPERFORM.
Position: Long Sirius XM Radio, No Position Apple.
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