We're now less than 24 hours away from
Sirius XM Radio 's (Nasdaq: SIRI)
third-quarter report. Since it's one of the market's most
heavily traded stocks in terms of sheer volume, speculators
are lining up on both sides of the report.
Is this the report that validates Sirius XM as a cash-flow
positive media giant? Or is it another step down for a
platform that may have peaked last year?
Hold your love letters (or battering rams) for the
company. Let's go over four of the meaty questions that
should be answered tomorrow.
1. Where are the subs?
After shedding net subscribers during the first and
second quarters, it's time once again to take roll call.
There are a few things working in Sirius XM's favor
here.
185,999fewer subscribers is better than the
404,422listeners it lost during the first three months
of the year.
Between
Ford 's (NYSE: F)
bullish quarterly reportand the successful "cash for
clunkers" campaign, there are signs of life in the
automaker industry. This is arguably Sirius XM's best
source for new accounts.
The economy appears to have turned, and other
subscriber-based consumer services are bouncing back.
DISH Network (Nasdaq: DISH) turned positive
during the second quarter, leaving Sirius XM,
TiVo (Nasdaq: TIVO), and
Time Warner Cable 's (NYSE: TWC) flagship
video service as the only heavies losing subscribers.
Two months ago, my best guess had Sirius XM shedding
80,000 subs, as an uptick in churn over recent rate hikes
and new fees eat into the new bodies. I opened up the stage
to other crystal ball watchers, and I'll crown a victor among
the dozens of predictions tomorrow.
2. How is the bottom line holding up?
Last year's merger between Sirius and XM has created
several cost-saving possibilities, above and beyond the
typical synergies associated with major deals where
overlapping redundancies are eliminated.
Subscriber acquisition costs have diminished as Sirius XM
can market satellite radio with a unified front, instead of
the two companies having to attack one another. As the only
game in town when it comes to satellite radio, Sirius XM will
have a little more leeway with its automotive partners and
on-air content when contracts come up.
The extent of the cost savings finds Sirius XM ramping up
its projections for adjusted operating profits in 2009 --
from $300 million to $350 million to $400 million -- over the
past year, despite subscribership shrinkage.
A healthy quarter, enhanced guidance, or a clear path of
conviction to actual profitability will go a long way toward
offsetting any potential weakness in its subscriber
tally. Continued... |