I find myself at a complete loss in attempting to figure out the point of having the conference call in the first place. For starters, Sirius XM issued a press release that immediately caught the attention of the investment community. It was very well received and the stock initially began an ascent. Then the unthinkable happened, Sirius XM spoke. It was not a sell off mind you, as the overall market took a beating. If not for the numbers they reported it could have been a very, very bad day.
The first problem I have with the conference call is that it lacked any emotion or excitement. In a businesslike manner, numbers were given. Any questions from analysts were deflected or deferred. I don't think one straight answer was given to any analyst at the end of the call. Ironically, Sirius XM offered much more clarity in the future, yet offered none at the call.
An analyst from JP Morgan wanted to know how much of the 400 million dollars in synergies might be realized this year, and the question was dodged much like a politician would avoid answering a question. When Merrill Lynch's analyst asked about marketing plans, the response was that the company wanted to talk to the retail community before talking to the financial community. Again, no answer was given.
Cowan was reported by a certain clueless writer to be upset with a 3 year time-frame for OEM interoperable radio introductions. (This particular article was probably written to generate more web traffic to his site, so I won't perpetuate it by linking to it). More on that in a moment. Mark Wienkes basically requested an instant combined report, but that did not really deserve an answer. The call was regarding results ending 6/30/08, not 8/07/08. This tells me that the analysts are looking to see the big picture, and not seeing it.
The problem with not answering reasonable questions is that analysts will lose interest in everything else and feel smitten along the way. All a human being can think about in that moment is that they were dismissed as though their question had little or no value.
The next problem with the conference call was that it was far from accurate, in my opinion. As noted above on the issue of interoperability, I find this inaccurate is because any manufacturer, at any time of their choosing can implement what is known as a "running change." This happens frequently in the automotive manufacturing industry, and is usually the result of parts changes. A radio is a part. The only issue is making the new part fit seamlessly into the manufacturing process. If an interoperable radio was the only radio available, it would be installed in every car on every assembly line tomorrow.
The top line run rate was reported to be at 2.4 billion dollars. I looked at the combined income figures and the run rate is closer to 2.48 billion dollars. Thats an 80 million dollar upside surprise potential in revenue, in the current environment and without any increases given in Q4 revenue from new offerings. Under-promising in a big way seemed to be the play of the day.
Another analyst wanted to know if the 400 million in proposed synergies included incremental revenue increases from new offerings which was responded with a tone of "probably not, but we are going to keep you guessing!" No mention was made of any expected increases from the navigation offerings as well. As investors, it seems we are expected to continue to wait until Q4 to be informed. Is it any surprise the stock cannot recover?
The ironic thing is that most companies will put on a dog and pony show. This call was the exact opposite. Perhaps that was the intent in itself. As usual, we are left guessing as to what comes next.