Does Sirius XM Have Too Much Riding On Auto Installs?
October 15, 2008 at 5:32 AM (PT)
The SILICON ALLEY INSIDER takes a swipe at SIRIUS XM RADIO TODAY, writing, "This much is clear: The market has little hope for the future of satellite radio operator SIRIUS XM, whose shares trade at a meager $.50 -- though that's almost 50% higher than their recent lows! CEO MEL KARMAZIN has been making the case for awhile that the company will turn the corner next year, an argument that would seem to be getting tougher by the day."
The company has a lot riding on automaker pre-installs, the story continues, so what does it mean that car sales are tanking? Not much. DAVID KAPLAN at PAIDCONTENT reports KARMAZIN's presentation at TODAY's MEDIA & MONEY conference:
"We’re a subscription business. About 96% of our business comes from that. The largest driver is when you go out and buy a new car, every car company has committed to putting it in. Next year, we’ll have 50% penetration. There are about 17 million new cars produced a year. That number will be 13 million next year. If there are only 12 million cars sold, no one has forecast that, but even if the worst happens, six million will leave the assembly line with satellite radio. Our surveys show that 50% of the people who are offered satellite with their new car, take it. That will get us to $300 million revenue growth even if DETROIT has a very bad year. Even in a market where cars are not doing well, we can still feel successful."
Beyond sales growth, the other big concern n this environment has to be the company's debt load, continues The SILICON ALLEY INSIDER. Again, KARMAZIN says not to worry, and that he's confident the company can refinance $1.1 billion in debt due early next year.