U.S. Electronics, the company that manufactured Sirius receivers with the XACT brand has been a frequent contributor in the merger process. The company, in a contract dispute with Sirius that dates back almost two years, is currently in arbitration as that is the remedy for disagreements outlined in their contract.
Ever since the merger was announced, U.S. Electronics has been against it, citing that they do not want to be excluded from the ability to make receivers for the merged company. The fact of the matter is that U.S. Electronics is acting disgruntled and scorned, and is simply lashing back. The problem with their strategy is that government agencies and officials typically do not like being USED as a wedge for other matters. In fact, most agencies despise such behavior.
The issue started when U.S. Electronics decided to form a separate company with people who were dedicated to the Sirius account. This “new” company was in effect the same people that handled Sirius. The issue was that the new company was now trying to do business with XM. Sirius, relying on contract language, decided against using U.S. Electronics going forward, and instead cit a distribution deal with Directed Electronics. Thus, the dispute between Sirius and U.S. Electronics began to take shape. Issue’s not relating to the dispute have been brought out by U.S. Electronics, and their latest strategy has been to be an anti-merger thorn.
Any bridge that U.S. Electronics had with SDARS was burned long ago. Likely, neither company would carry an interest in dealing with them again, and that fact has not been lost on the regulators that U.S. Electronics is trying to USE to curry legislated favor. Simply stated, U.S. Electronics is trying to force a situation where Sirius and XM do business with them. Here is a hint for U.S. Electronics. It is not going to happen.
Earlier this week U.S. Electronics filed a MOTION with the FCC stating that a hearing would be required because Sirius and XM failed to respond to their request for a hearing.
In an analyst report issued yesterday, Stanford stated the issue and outlined the following:
“A Dec. 12 filing at the FCC by US Electronics says that the FCC must reject XM and Sirius’s merger application because XM and Sirius failed to respond to a Nov. 9 petition filed by US Electronics. (In that Nov. 9 petition, US Electronics claims that XM and Sirius’s plans to sole source its equipment purchases post-merger would violate the FCC’s “open access” policies.) Our take: US Electronics appears to have identified an oversight by XM/Sirius (assuming XM/Sirius did in fact fail to respond by the deadline). But after reviewing US Electronics’ petition, we simply do not expect the FCC to deny a merger the magnitude of XM-Sirius on an issue that would seem to amount to a legal technicality. US Electronics does cite FCC rules that require XM and Sirius to respond to petitions such as US Electronics’ Nov 9 filing by a certain date, but we assume XM and Sirius will quickly file a response that perhaps argues either (1) US Electronics has misread the FCC’s procedural rules; or (2) XM and Sirius did fail to meet a filing deadline, but the FCC has the ability to cure this filing defect.”
Simply stated, there is indeed remedy to the situation. While U.S. Electronics may have found some technicality, it is still quite clear that their agenda is outside the merger, and rather that of a company that seems to be bent on revenge.
Review of the XACT website shows that it has not been updated since the time when they were doing business with Sirius. Thus, what we are dealing with here is a company that seems to have all of their eggs in one basket, and a company throwing as much mud against the wall as they can in hopes that something will stick.
Does U.S. Electronics have standing? Maybe
Are They USING the regulators to fight for them? YES
Perhaps they feel that they are in a losing proposition with the current arbitration with Sirius, and they have nothing else left to do but throw mud as their own ship sinks.
Position – Long Sirius, Long XM, No Position Directed.