When Sirius XM released its 10K results, I was very negative on the company’s outlook. My opinion was and remains that the company needs to do more in the way of marketing if it is not only to survive but thrive. It may be that my doubts were unwarranted. SIRI stock has seen a dramatic increase on a percentage basis since the release of the report. The conference call was met with approval, as shares are up more than 21% today.
The company provided a much clearer perspective on the benefits of the newly merged entity. Despite a horrible economic landscape, the synergies of the merger are paying huge dividends. Synergies have resulted in greater revenue growth and lowered costs. The company is operating with the frugality required to survive this difficult economic climate.
Although the news of new Apple applications got most of the media’s attention, the real news I believe can be found in the hints that the company provided during the call. As an example, the company spoke of the negative impact that the closing of Circuit City had on its retail sales. The discussion that followed brought with it an acknowledgement that the company forecasts more traffic in lower priced retailers, and a desire to do more in that area going forward. When someone mentions low priced retailers, my first thought is Walmart.
Getting involved on a larger scale with companies like Walmart is good, but there is no way that Walmart will provide the solutions the company seeks without an aggressive marketing campaign to support it. With a simple marketing effort, the company’s products may end up on the shelves of high traffic auto parts retailers such as AutoZone. As more and more people seek to repair their older cars rather than purchase new ones, getting the product in these types of stores will help retail sales recover from the big electronics retailers which have seen foot traffic come to a standstill.
It just so happens the company mentioned a marketing push as well with the company hinting at a plan to deal with declining auto sales. This is what the company has been missing and the street seems to think that Sirius XM is at the right place at the right time as its shares continue to rise.
Position: Long Sirius XM