A Response To Those That Question
Since I am once again being attacked by Brandon Matthews, and since he is submitting that attack to sites such as Trefis, I will respond.
In preparation for the outline below, readers should first understand the back story by reading or re-reading the following articles:
- November Auto Sales Make It a Challenge For Sirius XM To Meet Subscriber Guidance – Spencer
- November Auto Sales Are In – How They Impact Sirius XM – Spencer
- Finalized November Confirm Sirius XM Concerns – Spencer
- Sirius XM’s Q4 Guidance – What We Need To See – Spencer
- Analysis Confirms Sirius XM on Track To Meet Or Exceed Subscriber Guidance – Brandon
My response to Brandon’s Article:
1. I did not call into question the company’s ability to meet guidance. I simply stated that it would be a challenge. Typically most consider Mel Karmazin someone who “under-promises” and “over-delivers.” Getting 442,000 subscribers in Q4 will not be a walk in the park.
2. I am not lazy at all. In fact, I broke out many Q4 numbers by doing the math and subtraction in the very article Brandon seems to disagree with.
3. Brandon seems to imply that I am of the opinion that auto sales are flat, and then proceeds to show year over year comparisons showing that sales are up. I NEVER stated auto sales were flat year over year. This is a figment of Brandon’s imagination apparently designed to steer the reader in a particular direction. I am well aware of the auto sector, as I follow it quite closely. If you notice, in Brandon’s own chart (shown in black), the auto sales in the second half of 2011 have been flat.
4. Brandon states that December Auto sales should come in between 3.2 and 3.3 million. Through November, Q4 auto sales are at just over 2 million. Thus Brandon is seeking a December with auto sales of 1.2 to 1.3 million. The best month this year was March with sales of 1,245,000. December would need to rise substantially from November in order to hit the numbers Brandon is seeking.
5. Brandon seems to randomly assign the following to auto sales so far this year:
- Q1 2011 =3 million
- Q2 2011 = 3.1 million
- Q3 2011 = 3.15 million
Using actual numbers that I track, here are the real figures.
- Q1 2011 – 3.05 million
- Q2 2011 – 3.27 million
- Q3 2011 – 3.18 million
Interesting that Brandon shows stepped growth happening and Q3 as the highest to date, but the actual numbers show Q2 as the highest to date. The issue here is that Brandon neglected to pull actual data and instead referred to a copy and pasted chart.
6. Brandon then goes on to say that I ignored production. I did nothing of the sort. In fact, I am the only writer who takes the time to break down production and how this impacts Sirius XM on a regular basis. This is important because some Sirius XM’s OEM partners provide subscribers at the time of “production”, while others are at “point of sale”, and yet another category are “trailing” by at least three months. For example, at the time I wrote my article, Ford (a partner that supplies subscribers at production) had produced 656,000 vehicles in Q3. This was down from 710,000 units in Q2 (which I will address again later). The company’s Q4 production was initially slated to rise from the 656,000 in Q3 to 660,000 in Q4. After my article Ford reported earnings and in that conference call, brought Q4 production up to 674,000 units (14,000 higher than they guided initially, 18,000 higher than Q3, but 36,000 less than Q2). Production from Ford, THE MAJOR player from Sirius XM partners that supply subs at production, has actually gone down from the peak.
7. Brandon then goes down the path of showing subscriber additions and churn for 2011:
- Q1 Net Subscriber Additions = 373,064, churn rate 2.0
- Q2 Net Subscriber Additions = 452,147, churn rate 1.9
- Q3 Net Subscriber Additions = 333,683, churn rate 1.9
He fails to show the reader deactivations for the year, which are as follows:
- Q1 2011 – 1,679,303
- Q2 2011 – 1,727,201
- Q3 2011 – 1,804,448
It is important to know that a flat churn rate does not mean the same in absolute numbers from quarter to quarter. Notice that even with the stated churn rate improving from 2.0% to 1.9% that the number of deactivated subscribers has gone up quarter after quarter. This happens because the company has a bigger pool to churn from each quarter. Q4 of 2011 will see a deactivation number that is greater than that which we saw in any previous quarter. Thus, if Sirius XM is going to have between 1,850,000 and 1,875,000 deactivated subscribers in Q4, they need to add between 2,292,000 and 2,317,000 subscribers in order to hit the 442,000 they need to deliver to hit guidance.
8. Brandon states, “As you can see, in the second quarter of this year, Sirius XM reported a greater number of net subscriber additions than it would need to report in the current quarter. Not only did the company report good results, it did so in the face of weak economic data, a Japanese Tsunami and flooding in Thailand which devastated the the economy and auto supplies.”
What Brandon failed to note, and something that I wrote about extensively, is that while tragic, the disaster in Japan gave production geared OEM partners a boost in Q2. The impact of the disaster slanted results, supplying more subs in Q2 than otherwise would have been there, and less in Q3 than would have otherwise been there. Further, production partners, such as Ford produced more cars in Q2 than they will in Q4. Thus, in theory, Ford will supply less to the subscriber line in Q4 than they did in Q2.
9. In Q2, the quarter that Brandon says should be easy to beat, subscriber deactivations were 1.727 million. Gross additions came in at 2.179 million. We already know that deactivations will be between 113,000 and 138,000 higher than in Q2, and gross additions in that quarter were 111,000 to 136,000 LOWER than what we need to see this quarter. Thus, considering the two factors, we have a delta of between 224,000 and 274,000 that needs to be made up. Pretty important information to consider.
10. Brandon then posts a chart from Ward’s auto world (without credit) that shows inventory. The problem with this chart is that it is not weighted, and does not consider weighted averages. By example, Ford and GM outsell Chrysler by a wide margin:
- GM YTD – 2,269,000
- Ford YTD – 1,936,000
- Chrysler YTD – 1,231,000
Of the 5,436,000 sold, Chrysler accounts for 23%, while Ford and GM make up 77%. GM’s days of inventory is much more meaningful than Chrysler’s 78 days as it relates to Sirius XM and the delivery of subscribers.
11. Brandon then quotes the gross additions number showing that it is going up. This is all well and good if the information he provided was correct. IT IS NOT. He quotes Gross additions of 6,350,621 for 2010. That actually happens to be the number of deactivated subscribers. The correct gross additions for 2010 was 7,768,827. In addition, had he thought a bit deeper he would see one of the very issues I addressed. In 2010 Sirius XM had gross additions of 7.77 million and NET additions of 1.4 million. In 2011 gross additions will come in at a number above 8.65 million. This is an impressive number, but that additional 950,000+ gross additions only added 200,000 to the NET subscriber line. In other words, gross additions had to improve by 1 million in order for net additions to improve by 200,000. Think about that.
12. Brandon then goes on to say that the addition of Latin programming should help reduce churn? Sirius XM has been lacking in Latin programming for years. People disappointed by the previous levels of Latin programming have already left long ago. People wanting Latin programming will just now be signing up. These new channels are not a churn reducer as much as they are an incentive to bring in new people. Churn is based on SELF-PAYING SUBSCRIBERS already in the pool.
13. Lastly, earlier this year it was Brandon Matthews that told all of his readers, and posted on message boards across the web, that Sirius XM would add 1,200,000 subscribers in Q1. He gave reason after reason why this would happen. My projection for Q1 was, “Simply stated, anything above 400,000 NET subscriber additions will be welcomed news from the street.” The actual number in Q1 was 373,000.
In closing, I have not stated that Sirius XM will miss their subscriber numbers. I simply stated that it would be a challenge, and even outlined some things to watch for that the company could do to make it happen. Bear in mind that it is partners from the production and point of sale categories that matter in getting to the Q4 number needed to meet guidance. There is a distinct difference between calling for the company to miss and pointing out that something will be a challenge.
Spencer, I’d offer that by responding in this way, diminishes your integrity. Your articles are very sound and respected. I hate cliches but the cream does eventually rise to the top. Keep your head down and thicken your skin. The rest will sort itself out.
Gary,
As unfortunate as it is it seems that I have to stoop down and play in the mud every now and then. I seem to get stalked by a few other sites out there. It appears that they can’t help but chase me one way or another.
Cheers and happy holidays
Spencer, the impression that I got from your recent articles (Seeking Alpha) was that Sirius XM would not make their numbers in the 4th quarter. If it happens to make its numbers this quarter, your reputation would most likely suffer, IMHO.
Sirius Texan….
There was NOTHING in those articles that stated Sirius XM would miss. That type of mantra was generated by some who like to twist words into something that simply is not there. Some statements from my first article:
“So what does Sirius XM need to do to pull off 442,000 subscribers in Q4?
1. Bring churn down to about 1.75%
2. Be aggressive on conversion and get that number up to 45.5% or better.
3. Push the retail channel – They need to get the Lynx on the market ASAP.
4. Offer up some great consumer deals.
5. Get the used car market ramped up ASAP.
The company can pull this off, but it is no longer a walk in the park. In fact, we need to see Gross Additions hit a level that has not yet been accomplished by the company in order to simply meet the guidance of 1.6 million.”
From the second article:
“One silver lining is that Edmunds has laid out some reasons for hope that this December could represent a good month for the auto sector.”
and
“As stated before, the company is very capable of hitting their subscriber guidance. They simply need to hit on all cylinders, including:
Stronger December sales that hit at least 1.15 million
Reduce churn to a level near 1.75%
Increase take rate to at least 45.5%
Get the Lynx unit out in retail or at least promote the Edge unit
Work on retention stronger than usual (could impact ARPU)”
Further, I stated that if the company reports 1.65 million, but discounts heavily and pulls out all the stops to improve other metrics that my statement about it being a challenge will be correct. Again, we have become programmed to think that Sirius XM “under-promises” and “over-delivers” Over delivery is coming in at 1.7 million while not impacting ARPU, etc.
Spencer,
Do not forget the aphorism of “not getting into a fight with a pig. You will both get dirty and the pig loves it.”
v.I.
I know that one well. In my business I have to take off the cuff links every now and then, roll up my sleeves, and hop into the mud.
I consider it personal therapy with the benefit of getting proper and correct information to readers.
seems that pig has just enough information, or misinformation to be very dangerous to those that want to invest.
I agree with Gary. I read Brandon’s article and he doesn’t mention you at all. He mentions other “bloggers.” You on the other hand, mention him personally. Very strange.
1. I would have never read Brandon’s article if you had not linked it to this article (giving him more exposure).
2. This article makes YOU look silly.
sxmfan…..
1. Brandon stalked me to my previous article in the comment section, and then proceeded to write an article about that directed at me. This was his second attack within a week. Sometimes people deserve a dope slap. It was time to give Brandon his (YET AGAIN)
2. Brandon raped and pillaged this site, has spread many false lies about me personally, and continues to do these things to this day.
3. If this makes me look silly, so be it. Every once in a while I need to clear the air because Brandon and a few other continue a misinformation campaign.
4. I have no issue giving Brandon “exposure”. By showing people the poor quality of his analysis and work, they appreciate what I do, and do for free, even more.
5. Brandon could simply go about his business running his own site and charging people for it and never really bother with me. Instead he obsesses about me on a daily basis.
Cheers and happy holidays
Spelling: WEEK (There are 7 days in a week)
WEAK (Spelling week this way is weak, especially for an author.)
a typo that has been corrected. Thank you for the heads up.
1. I didn’t see those comments and I am willing to bet the majority of others did not either.
2. I don’t see lies. I don’t follow him.
3. It’s your site.
4. That’s fine but, you are putting more money in his pocket.
5. As a reader of SIRI news, I do not see that obsession. I can’t be the only one. This article reads like something that everyone should see as common knowledge but, I am willing to bet that 98% of the people who read this have no idea what you are talking about because;
a.) They have no idea who Brandon is.
b.) They didn’t read those articles.
c.) Even if they did, they didn’t read the comments.
Personally, I would have done exactly what Brandon did and called out “other bloggers.” That way people who are “in the know” know exactly who you are referring to while the rest of your readers don’t have to deal with soap opera drama on what is supposed to be credible website.
Cheers
Brandon does what he does, and then many things that people simply do not know about.
Putting a couple of nickels in his pocket is the least I could do. It is the holidays after all. Now he actually has two nickels to rub together and may not have to beg people for donations.
Spencer,
There is no need to respond of even mention Brandons’ name on your site. You have to realize that Brandon is capitolizing on SiriusXM fanatics that only want to hear his always bullish propaganda. He tells them what they want to hear and they actually pay to read his articles…I still cant believe that…lol..he even offers a “lifetime” membership. He will attack everyone else to make his “followers” feel like he is the “all knowing” and deserves to be paid to read his stuff. After all membership to his site is the same price as a Siriusxm subscription…absurd…Ignore trash like BM…He even got kicked of seeking alpha for being a shady character…
well said
………….Spencer Osborne seems to be a legitamate and reliable investor and author. His knowledge has helped me alot.
BM’s more Actionable information has been WORTH paying over and over again……in fact it has helped me accumulate approx. 150K shares and dollar cost avg DOWN to 1-dollar.
Lastly, paying for a subscribtion in Sattelite Radio is worth it many times over as well.
Zacks and Citigroup seem to agree……
Nuff Said
Draland….
Thank you for the kind words about me….appreciated.
I disagree on Brandon. For every one person that seems to like him and think his fee is worth it, there are dozens who see through the smoke and mirrors.
You could have, for FREE, and with a lot less drama, increased your holdings far more substantially simply using http://www.americanbulls.com.
$100 dollars invested in SIRI over the last two years would have become $442 with their alerts. Their site is quite simple, and they tend to do pretty well on technicals.
Draland…
Just curious because something you posted struck me as odd.
Brandon’s pay site has existed for a bit over a year. The last time SIRI traded below $1 was September of 2010.
How did the subscription help you dollar cost average down to $1 when the stock has been above $1 since he launched it?
Not being a wise guy here, but am quite curious.
No problem Spencer, but before BM had his site, he used to write for SA…in addition to some other places where he even recommended to sell, if I remember correctly, immediately following MERGER.
Additionally, if I’ve correctly followed some of his profitable advice, ultimately increasing my total amount of ‘dry-powder’ [$$$]available, then buying MORE shares, at let’s say $2 for that matter, when your already at an average pps of $7 invariably helps your avg pps come down…..
Now don’t get me wrong, it wasn’t all him, I FOOLISHLY picked up about 60,000 of those shares all on my lonesome, somewhere between 9-cents and $0.50…. 🙂
Seems you did well. You must have used Brandon as a contrarian indicator because he tends to miss a lot. If he was so darn good he would be wealthy by now. Instead he begs people for money.
Oh well
Spencer… By responding to Brandon Matthews, you make him important, when he is not and has made more wrong calls than any other writer out there.
Do not become insecure that you feel you need to defend your actions. Confidence means you need do nothing at all.
Jesse
I understand, and more often than not simply ignore his stuff.
I am not at all insecure about my work. I do feel empathy for those that fall for his stuff, and sometimes calling him out is needed if only to shine a light for the misguided
I hear ya
Spencer, your guidance and cool headedness has kept me in the Siri game during some rough patches this past year. You have many fans and you shouldn’t lose a bit of sleep over this little cockaroach’s droppings.
I will have a happier holiday thanks partly to you. Have yourself a great one!
Spencer, I will give you and your site credit for not suppressing criticism, unlike a particular site (a controversial “famous” Santa Monica residence is its golden boy).
texan….
I think you are referring to Rocco and Seeking Alpha based on the location you stated.
Bear in mind that Rocco has not control over what comments get published, which do not. There are some satellite radio dedicated websites that censor quite a bit.
Here at SiriusBuzz we tend to let all comments publish unless they violate the guidelines
As long as no body curses at your site, the comments would be published, and that’s what I am giving you credit for.
Spencer-
“Notice that even with the stated churn rate improving from 2.0% to 1.9% that the number of deactivated subscribers has gone up quarter after quarter. This happens because the company has a bigger pool to churn from each quarter.”
This statement is not entirely correct. First of all, there have been sequential quarters when deactivations did not rise. This is true for both churn and totals. More than half the deactivations come “churn,” but there are substantial deactivations coming out of the paid promo trials that don’t convert.
The fact that the company has a bigger pool to generate cancellations is true, but that does not mean that changes in the percentage of churn or conversions did not or will not have an impact that is substantial enough to overcome the larger pool.
As to all the statements about Brandon, I enjoyed the comments his articles tended to generate on SA and learned a lot from the disagreements that they inspired. And as to being kicked off SA for being a shady character – that’s not the case. He got into a spat with another SA author and wrote a critical article of the author on his own site. The article was deemed to be a personal attack and in violation of SA policy. Brandon chose not to take down the article on his own site and SA deactivated his account.
way off base here with the SA stuff. Sounds like you got fed the propaganda. But then again you probably buy his “50,000” follower BS. Fact is that Seeking Alpha assigned any new person that signed up some authors for about two months. That was when Brandon went from a few hundred real followers to 50,000 “followers that were simply assigned to him.
So long as the number of subscribers rises, 1.9% will be higher quarter after quarter on an absolute basis.
Spencer-
I wasn’t fed anything. I could care less about the number of followers. I learned a lot from the comments his articles inspired and was following the articles and author attacks that were the cause of his deactivation. If you have a different story, please enlighten all of us.
You wrote “As long as the number of subscribers rises, 1.9% will be higher quarter after quarter on an absolute basis.”. Again, this is another true statement, but avoids taddressing the incorrect statement in your article. The 1.9% addresses ONLY the self-pay monthly churn. It does not equal total deactivated subscribers and is part of the reason that the total deactivations have NOT gone up quarter after as you have incorrectly stated. Check it out.
You say, “I ;learned a lot from the comments under his articles”
You are probably right. The guy was so far outside the ballpark that people had to literally reel him in in the comments section.
The truth is both of you are good at what you do and post great article which makes us SIRI inventors come back to your sites looking for more 🙂
truth is that there are many faces and aliases to Brandon. He is definitely good at making those that are gullible fork over money to him. The number of suckers is astounding
In case some of you aren’t familiar with some of BM’s terrific reporting and prognosticating:
BM was stating emphatically that Sirius was going to file bankruptcy (during the dark days of financing post merger)
Then, when that never happened, he stated management was going to issue a reverse split
Also, MLB games would be available on the Sirius side of service soon
Liberty Capital was going to buy the company (that’s still possible, but he was proclaiming this would happen months ago)
And these doozies;
Don’t forger this whopper!! Sirius stock to hit $3 or $4 on index inclusion (This year, not pre-merger)
And he’s always proclaiming the new smart phones will have a satellite chips in them:
The lawsuit Stern is currently involved with would be dismissed.
Really, his bad predictions never end. The conspiracies never ever end too.
Sure, every once in awhile SiriusXM stock price moves the way he’ll predict, but that’s like flipping a coin, now really.
I read his articles mainly for amusement and to watch his followers drool over how wonderful he is. A tool, no less.
Spencer, please stop responding to this character. Anyone who has somewhat of a smidge of intellect knows his game. NOOOOO credibility whatsover.
Spence:
if you haven’t noticed, there are more comments regarding Brandon’s achievements than what you stated in your articles. I agree entirely with those that commented that your recent SA articles slanted more to SXM not hiting guidance. Must be the negative perception that you are painting. Perhaps you need another to proof your SA articles that you get PAID to post. I guess two are drinking the same KoolAid when receiving money for articles that lead others to action.
Nevertheless, can you please provide your background credentials on experience, education regarding Finance/Credit Analysis. I am interested in seeing how you are the so-called expert.
AMP….
Brandon has a few that are so into the kool-aid he serves, that they will always toot his horn for him. I would not call what Brando does an achievement. More like a song and dance.
You are entitled to an opinion that you think I said that the company will not hit guidance, but my words are right there for all to read. I called it a challenge, and a challenge is what it will be.
Why do you take exception to someone getting paid for their work? Does the $30 or so that was generated by that article offend you? I donate more to charity than I receive from writing about satellite radio. I support Autism, CAS, Veterans, and breast cancer charities.
I did not call myself an expert. You seem to have assigned that moniker to me.
I have followed the stock market for over 25 years. I have crunched numbers, own businesses, managed many people, and followed satellite radio for quite some time. I have managed massive budgets for many investment banks, and assist same on a regular basis.
Spencer… what is your opinion of the Forbes story saying “Don’t Be Surprised When SIRI Has A Blowout Quarter.” Do you agree with how he says SIRI will reach the 442+K new subs?
http://www.forbes.com/sites/gr.....r=yahootix
Jesse-
It’s a Brandon Matthews article and it’s loaded with inaccuracies.
“It may surprise you to learn that Sirius XM does not report fourth quarter subscriber results. Rather the company reports full-year results.”
Wrong! In the press releases that Sirius issues for the full year they always report Q4 and YTD figures.
And it gets much worse… What BM calls Gross Additions are actually Total Deactivations for the years 2008 and 2010. To give him some credit, he did get 2009 and YTD 2011 correct. And, hey, if it was baseball, he’d be batting .500!
jess….
It is most unfortunate that Forbes published a piece like this submitted by Brandon Matthews. I am not sure which is worse, the fact that Brandon submitted an article to Forbes when the errors in it were already known by him, the fact that Brandon is charging people for this article, but gives it away, or the fact that Forbes neglected to do any research into the piece prior to publishing it!!!
Wow, today B Mathews has a special on his lifetime subscription to his site! Only $50.00 one day promotion . That guy is real sleezy and those that pay for that site should contact me. I have some stuff I can sell you. First I will sell you a bridge that has great satellite reception! Only $50.00 for Life..act now!