Karmazin Speaks – Will The Street Listen?
With the economy being what it is, a feel good economic story is hard to digest. It is a challenge faced by many companies, as they try to hold the line, maintain a positive outlook, and guide the street to be understanding of numbers that are better than should be expected, but not as good as years past.
Sirius XM CEO Mel Karmazin spoke with Reuters today, and much of what he outlined should be seen as a positive for the company. However, the street needs more than good intentions and words, and even when a company delivers on their guidance, as Sirius XM did in Q3, people still look at anything with a jaded eye.
Karmazin made several statements, which in normal economic conditions would be enough to get some traction in the equity. Today, this news was simply absorbed with a shrug of the shoulders, and a show me mentality.
POSITIVE POINT #1
Karmazin sees double digit revenue growth on a percentage basis in Q4. Wonderful news that seems to have fallen on deaf ears. In a time when other media companies are seeing double digit declines, Sirius XM Radio is still growing, yet no one seems to care that Sirius XM’s revenue is a polar opposite to all of the bad news out there. Perhaps it is too difficult to grasp that there are still companies that are in a growth trend at this point in time.
POSITIVE POINT #2
Karmazin is confident the company can refinance debt due in 2009. Perhaps this issue is the overshadow that simply refuses to go away. Karmazin has been expressing confidence with this subject for a while, and this issue is where a “show-me” attitude is likely warranted. That being said, I have always felt that the company will indeed be able to get the debt issue resolved. I would have hoped that it would have been done by now, but still, it should get done. For the equity to see improvement, an answer on the debt needs resolution.
POSITIVE POINT #3
Karmazin has no immediate plans to cut its subscription prices, even in the midst of the economic recession. At a time when prices are being slashed left and right, you would think news that they will be able to hold the line would be news that is well received. Instead, the street barely reacts. This is substantial news. This means that churn is stable. It means that new subscriber numbers are satisfying the business model. It means that revenue can continue to grow. Perhaps the lack of a profit from Sirius XM tempers this news a bit, but with the continued positive trend shouldn’t the street give this a bit more weight?
POSITIVE POINT #4
“We did exactly what we wanted to do for Black Friday, which is not great news because we didn’t have high expectations,” Karmazin said, referring to the Friday after Thanksgiving, which kicks off the holiday shopping season.
While humble sales are not a positive point, the fact that the company was able to meet their expectations is stable. Had sales been shy of low expectations, the worry lines would rightfully appear. With the news being that holiday shoppers are being cautious, meeting your expectations is a small victory unto itself. On a side note, meeting those expectations did not come without an expense. Many retail radio’s came with free service for three months. Thus, you have a new subscriber, but n o revenue just yet.
POSITIVE POINT #5
Perhaps the biggest bit of news from the Reuters Media Summit was Karmazin’s statement that Sirius XM Radio is not for sale. “We don’t feel that we need to be acquired,” he said. “You should assume the company is not for sale.”
With stock prices at low levels, one distinct worry many may have is that the company sells itself. Investors who believe in the long term outlook of the concept of satellite radio would potentially be looking at a situation where they would not participate in the success of the company in the years ahead. Of course, there is no guarantee that the company will be an overwhelming printing press of cash, given that it has at times been a printing press of shares. However, those that have maintained faith in the concept should be able to reap the reward should it come.
In the end, it boils down to what transpires over the next few months. Will Karmazin’s outlook be realized? Will the street finally be able to digest good news? Will satellite radio be successful in refinancing their debt? There are a few questions that seem to be keeping many hesitant.
[Reuters]
Position: Long Sirius XM
John
Further to consummate this merger he renegotiated:
1. XM’s 1.75%, 400M convertible debt due in Dec. 2009 to 10% and is still due on 12,09.
2. He had XM utilize the 250M and 100M Bank credit facilities fully to pay of the GM credit facilities and close them down, that are now due in May 2009.
3. He had XM make an offering to raise $778M in 13% Notes due in 2014,
4. He also had XM make an offering of $440M, 7% Convertibles, backed up by the lent shares, to short the stock, due on 2014.
He basically took on $2Billion of XM debt to do this deal of which, $750 M is due in May and Dec. of 2009.
Sirius as a stand alone company, had roughly $389M due in Feb and Sept of 2009.
These are the facts as I understand them. As I said the decision was his, with the blessing of the board, and the decisions wisdom is yet to be decided.
By the way John, I left out the repurchase of the transponders and Sirius’ proposed satellite launch to not confuse the debt issues and more than they already are. There is also $1.75M here and the Honda note for around $80M that may convert to shares if they can get the price above .67 / sh. A few months ago, converting that debt to shares was a given. I am not saying that they won’t be successful, but their debt issues are considerable.
cos1000 – nice reporting of very relevant information.
Tyler,
You said:
“What i mentioned was how the sales guy was paid. If he is paid by what he brings in, then he will not be getting paid much. I also gave an example of how an economy can impact the situation.”
I say:
If the sales guy is not getting paid much, because his performance is not resulting in revenues, then who makes the decision as to whether the sales guys is still in sales, and thereby being paid??
Now, replace “sales guy” with “Melvin Karmazin” and see if you come to the same conclusion.
Apparently, Melvin is somehow exempt from all detrimental effects on his employment? Amazing to me.
And, in my scenario, the Economy was NOT a factor 9 Quarters ago… yet, you have yet to acknowledge this portion of my scenario, preferring instead, to only look at the 3rd Qtr of 2008 (August debacle financing).
What % of Sirius issues do to the immediate economy? Not much. My assertion is that Melvin has been taking this company down for more than a few years. And, if he was any type of a Leader, he would have pulled Stern by his nose and made him live up to the non-existent “2nd Push” for subscribers. Instead, Melvin went on a spending spree for “more content”.
His August decision to hasten the decline was his decision which He attributed to the economy. Nonsense! The deal was, I believe, a deal to toss a bone to his “holiday buddies” I mentioned in one of my earliest posts, who now control the destiny of the company, with Melvin’s approval, and they are making a bundle, while shareholders are demeaned and defeated.
Sure, I’ve an axe to grind with Melvin. You betcha, to coin a phrase from the former GOP V.P. Candidate. Real dollars are in play here, and lots of losses can only be attributed to the results posted by this company under the current CEO’s tenure.
Maybe it’s human nature to look for someone to blame when things don’t go the way we expect. But wanting to blame Mel is absurd. Nobody @ Sirius Xm is trying to commit company suicide. When Mel was fighting for the merger we all were on his side. The NAB was the enemy! Georgetown Partners were the enemy! The FCC & DOJ were the enemies. Know that he won the hard fought war we want to hang him for treason? Was it his fault it took 18 months to get the merger passed? Was it Mel’s fault the economy tanked? Is it his fault that the Detroit 3 are in trouble? Was there a movie that Oliver Stone made on “The Sirius Xm Conspiracy” that I missed? Most all of us have lost money on paper or in cash. If you look at what Mel & his staff have recently reported, with what the company is up against it might be getting close to buying time. When the Detroit 3 get their money and Sirus Xm re-finance their debt then as the economy recovers I believe the stock will rise. The bottom line is it’s a great product that’s getting the fat cut out. I think the stock is @ it’s low.
When I suggest to people that they get satellite radio for someone as a gift this holiday season, the look they give me basically says “You’ve got to be shiting me!” If I asked them if they had herpes, I would get less of a reaction. So no, the street isn’t listening – and nobody ON the street is listening.
The marketing of Sirius/XM has been a disaster, and I blame Mel Karmazin for that. We live in a country of ignorant shopaholics who will buy practically any piece of crap you stick in front of their faces. They have a great product – why don’t they stick it in front of their faces!? If satellite radio can amass 19 million (allegedly) subscribers without getting the word out, what do you think the number would be if they made even a feeble attempt to promote the service?
How is it that I love the product, listen to it for hours a day, and never tire of it or cease to be amazed by it? Am I some kind of a freak or something? What on earth has lead to the decline of radio? Why is it so uncool? I just don’t get it! I don’t know how people can resist the spontaneity of it, and in the case of satellite, the sheer enormity of the content. I can only reach one conclusion; the majority of people in this country are ignorant, conformist morons who have an insatiable desire to follw the lead of the crowd. They are totally controlled by the media. I hardly have any friends, because I cant stand most people. People in my own family make me sick!
What Mel has to do is get the attention of the small percentage of the population that isn’t completely stupid and clueless. I say there is, potentially, another 10 to 20 million subscribers out there who he hasn’t tapped into. After that, good luck; too many people will NEVER pay for radio. They either don’t listen to radio at all, or they just don’t care about music, news, or entertaining talk shows. In other words they are just too fucking stupid to appreciate what satellite radio offers. They are a lost cause, and Mel will never get through to them. He must find a way to persuade the “potential” group.
LIke I said, just put it in front of their faces, Mel. What are you waiting for? Is this just too simple for you and the other geniuses to figure out?
Senator Dodd is thinking like me.
Headlines:
Dodd: General Motors Executive Should Resign in Exchange for Bailout
Sen. Chris Dodd called on the CEO of General Motors to be replaced if the auto company is to receive any bailout money from the federal government.
The Link:
http://www.foxnews.com/politic.....e-bailout/
Well, fellas. Is Dodd wrong, too?
Dodd should resign because he is part and parcel for the housing collapse.
Dodd is a complete fraud.
Neal. Did you really write “I think we are at the bottom”? That is this years winner. It’s .16 Neal, it hit .08. I guess your prediction is pretty safe………………
Jon oh Jon oh Jon.
When you decide to get to real time, feel free to address me.
Otherwise, I’m of zero interest rehashing the past.
If you want to start with say tomorrow’s opening price. The RS and dilution vote coming up in a few days.
The debt issues all of next year. Then have it. Otherwise you have me confused with someone else Jon.
Here it is Jon. I’m a pps guy. That’s pretty much it. Those things that effect it’s “current” pps, are truly all that I have any interest in.
Hey COS. Nice of you to break out you keystrokes this weekend. Your debt breakdown above,is the best I’ve ever seen. Thank you.
Hey Roadkill, you pull a Gump, and keep running , or just find something of more interest. Or as Steve wrote, did someone put something in your face? LOL.
Later
This Auto bailout w/ congress is a dog & pony show. The Detroit auto industry lobied the congress to lower the cafe standards for years. The congress takes the lobiests money and goes along with the game. Now the congress blames the Detroit 3 for being behind the curve. They should fire the CEO’s and then we should vote out the congress. Just look @ the oil embargo 35 years ago. The Dept. of Energy raised the cafe standards. Then over the last 3 decades they lowered them. Bush even gave tax breaks for buying SUV’s & Trucks then tells us a few years later “We Are Addicted To Oil”! No wonder the rest of the world has no respect for us. We have no right to complain about the economic problems were in. We voted these self serving politicians into office. I saw Brokaw w/ Obama on “Meet The Press”. I sure hope what we see (and hear) is what we get.
Socal, If it hit .08 it was for a nanosecond. It was charted @ .01 a couple of days ago too. I think those were mistakes made by computor or human error. But if it makes you happy you would be technically right. Look over the historic charts and tell me when it hit .08. I saw the 52 week High & Low(.08) but can’t find when it hit your low of .08. See you on the way up.
max….
Lets look at the metrics and keep on things that matter.
1. Are you happy with the churn rate? If not why?
2. Are you happy with SAC? If not why?
3. Are you happy with revenues? If not why?
4. Are you happy with marketing savings? If not why?
5. Are you happy with marketing efforts? If not why?
6. Are you happy with capex costs? If not why?
7. Are you happy with programming? If not why?
8. Are you happy with debt levels? If not why?
9. Are you happy that the CEO is making 1.25 million in base salary? If not why?
10. Are you happy that a-la-carte is happening? If not why?
11. Are you happy with ad revenue? If not why?
12. Are you happy that the company no longer has to pay Maxim, etc.? if not why?
13. Are you happy that $90 million of the $300 million in Feb debt has been paid down? If not why?
These are the types of things you will want to watch. These are the type of things, going forward, that will get the company to profits.
3.
Chris Dodd and Barney frank are a couple of shrubs!!
Not to mention Greenspan, with his little experiment playing with interest rates.
Those 3, plus a few more organizations including Acorn need to be made an example of. (Yeah, we are going to sue your bank if you don’t give mortgages to people who can’t afford them. We consider it a form of racism.) What a joke!!!
I am completely against all of this P.C. Political Correctness garbage. I still have people come up to me and say, oh, you can’t say that. And I just laugh in their faces and tell them to @%#$*&!! off!!
On a side note: 12/7 the day Pearl Harbor got hit, I would like to thank all of our brothers and sisters who have/are serving to protect of country. THANK!!YOU!!
I haven’t been following Sirius stock, but yesterday a friend told me his tale of woe and I decided to check into it. I’m always in the market for a good stock in a distressed situation. I’m no pro, but over the years I’ve bought stocks now and then when they took a hit, and sold for a profit after they recovered. I considered buying some Sirius with that goal in mind, but without digging very far, I’m disturbed by their 5-year history. Most other solid stocks were going up from 2006 to 2008, before this collapse started. But not so with Sirius. That’s enough to scare me away. Maybe I’m missing a big opportunity here, but it’s more of a gamble than I’m willing to take. I wish all of you the best and hope you all make a fortune.
Hey can anyone confirm if Bubba the money sponge is out?
The rumor mill is turning away.
Thanks in advance!!
Neal,
I’ve been unable to chart the .08 as well. It simply show up on the year low. Dread was actually the first to see it, maybe he picked it up on level 2.
Neal, if we RS times 50, and then lose half our pps, are we still close to a bottom?
Here is the only chart I could find.
http://i37.tinypic.com/xdblfd.png
cos1000 (D), I am not arguing the details of the financing both you and I have gone over them for some time (reading homers post, ect.) and know full well what they are. That is not the question at hand, we both know and Mel said they were bad, but the best he could get at the time. The question at hand is was it better to deal with the financing or a delay that would have come. Just emagine what would have happen to the PPS if they were still not approved by this time. All the crap with the economy and the autos and the financial break down would have still happened and effected them, but I believe even worse. My point is the company at this point is in the best position they have ever been in, in the entire history of the company. Financing is the only obstacle left. The other way they would not only had to deal with financing but in SIRI’s case a major problem of one of their OEMs falling apart. Look at it this way if the financial free fall did not happen which is the better position to be in merged or still in court trying to get merged. Like I said if Mel would have waited the same people would be blaming him for not doing what ever financing he could to get the merger done.
Max as for how much Mel got paid if he was fired today or just quit. he would have been paid a total of about 1,280,000 for the 3 years he has been at SIRI that is what his over 20 million investment into SIRI is worth today. his options would expire worthless. Also out of that 1,280,000 take another around 850,000 off, because that is about how much more after his salery and bonuses, of his own money he put into the stock. So in the end Mel was paid about 500,000 for the 3 years he was at SIRI.
Tyler Savery Says:
max….
Lets look at the metrics and keep on things that matter.
1. Are you happy with the churn rate? If not why?
2. Are you happy with SAC? If not why?
3. Are you happy with revenues? If not why?
4. Are you happy with marketing savings? If not why?
5. Are you happy with marketing efforts? If not why?
6. Are you happy with capex costs? If not why?
7. Are you happy with programming? If not why?
8. Are you happy with debt levels? If not why?
9. Are you happy that the CEO is making 1.25 million in base salary? If not why?
10. Are you happy that a-la-carte is happening? If not why?
11. Are you happy with ad revenue? If not why?
12. Are you happy that the company no longer has to pay Maxim, etc.? if not why?
13. Are you happy that $90 million of the $300 million in Feb debt has been paid down? If not why?
These are the types of things you will want to watch. These are the type of things, going forward, that will get the company to profits.
Tyler: Thanks for the 13 days of WishMas above. Happiness is defined by the PPS, period. All those metrics have done zero to stop the decline of the PPS.
On December 18, 2008 some will get happier, most will not.
Individually, line-item by line-item, I’m going to be Clear, Concise, Correct, Complete and Courteous in my response: I do not believe what Melvin says anymore.
By the way, are you Happy with the PPS?