12 novembre 2008

SiriusXM, la voragine finanziaria si allarga

Chi salverà la radio satellitare digitale americana? Si avvicina il punto di non ritorno per l'operatore SiriusXM, che nell'ultimo trimestre, scrive Business Week, registra 5 miliardi di perdite. E la celebre newsletter per investitori Motley Fool propone l'irriverente paragone tra la radio satellitare e il sistema bancario: il pezzo che segue in realtà mira a criticare l'interventismo del Parlamento, intenzionato a salvare con il denaro pubblico l'industria automobilistica in sofferenza. Una crisi che nuoce molto a Sirius: meno auto si vendono e meno apparecchi radio vengono installati. Vi verrebbe mai in mente di salvare con il denaro pubblico un'industria decotta come la radio via satellite, chiede Motley? Solo a un pazzo verrebbe in mente un'idea così balzana. Ecco, non fatelo nemmeno con l'automobile: merita di precipitare con tutti i suoi errori. E oggi un post in uno dei blog del Washington Post denuncia la delusione che il controverso merger tra quelli che erano due concorrenti in un unico operatore ha provocato tra gli abbonati, sempre più confusi da un'offerta ormai ridondante che non riesce a trovare un nuovo equilibrio.

Digital Entertainment November 11, 2008
Sirius-XM: A Long, Challenging Road Ahead
Subscribers are up, but the recently merged satellite radio provider lost nearly $5 billion last quarter and still faces a host of questions

By Olga Kharif

Mel Karmazin sounds an upbeat tone for a chief executive whose company, Sirius XM (SIRI), just announced an almost $5 billion loss.
During a Nov. 10 conference call discussing third-quarter results, Karmazin called the company's performance "impressive," considering the macroeconomic environment. Indeed, the troubled satellite radio provider showed some encouraging signs. The company ended the quarter with 18.92 million subscribers, up 17% from a year earlier. Sales also rose for the product of the July merger of XM Satellite Radio and Sirius Satellite Radio. Had the company been combined for the three months that ended in September, its revenue would have risen 16% to $613 million.
Karmazin also waxed optimistic about the company's ability to refinance some $210 million in debt due in February and other liabilities that add up to about $1 billion for the whole year. "The tone of the conference call seemed to provide some needed, if inconclusive, reassurance on the near-term debt refinancing," says Tuna Amobi, an analyst at Standard & Poor's.
Right Now, Any Growth Is Good
For some companies, growth of any kind is commendable when the economy is slumping into recession and customers are curtailing spending on everything but the essentials. "We are growing significantly, and companies larger than us and smaller than us are not," Karmazin said. The company ended the quarter with $359.6 million in cash, down from $438.8 million last December. Sirius XM shares rose 3.9% to 27¢ the day the earnings were announced.
Growth aside, some of the company's biggest challenges haven't subsided. Sirius suffered a third-quarter loss of more than $4.88 billion, reflecting the declining value of its merged assets. And investors are still awaiting details on debt refinancing (BusinessWeek, 10/22/08) from a company that's expressed confidence on the matter for months.
And results through September don't reflect more recent economic malaise, including further evidence of the collapse of the U.S. auto industry, a big source of sales of Sirius radio service. Shares of General Motors (GM) sank to a 62-year low Nov. 10 (BusinessWeek.com, 11/10/08) on concern over the automaker's prospects.

A Discretionary Expense

While Karmazin said the company's higher-end packages are selling well, subscribers may yet tighten their belts and cut back on satellite radio. "They are a very, very discretionary expense," says Larry Rosin, co-founder of consulting firm Edison Media Research about Sirius XM. "Families are cutting their expenses. It seems doubtless they'll lose some people that way." On Nov. 6, Sirius pared its subscriber numbers for 2009 to 20.6 million, from 21.5 million users it expected in September. "I wouldn't be surprised if they revised that guidance again," Amobi says.
The company's projections for earnings before certain expenses including taxes are holding steady vs. prior guidance. While many analysts still expect Sirius XM to lose money next year, the company is guiding for cash-flow break even.
To meet targets, the company is slashing costs—in part by eliminating 22% of its workforce. More drastic measures may be called for, Amobi says. "They are probably going to go deeper."


Satellite Radio: Too Big to Fail

By Tim Hanson
November 10, 2008

Congress is stupid. Really.
Amid all of the debate in Washington over what to do and whom to help to solve this financial crisis, our legislators are ignoring one critical and imperiled industry. It's piling up losses, overburdened by debt, and unable to attract consumers who have cut back on spending. And even a Hail Mary merger between its principal players will not save it.
Stock in its flagship company has dropped more than 90% this year, and something needs to be done. So listen up Obama, Reid, Pelosi, and all the rest: Forget about the auto industry. Now is the time to save Sirius XM Radio (Nasdaq: SIRI).

Yes, I'm kidding

In reality, there's no good reason for the government to step in and save satellite radio. It's a terrible business that's done nothing but pile up losses and disappoint shareholders. It can't compete with the Internet, podcasts, or MP3s. The business destroys value. If the government were to loan it money, it would never see that money again.
Bailing out satellite radio is a ridiculous notion. No one -- not even the politicians in Washington (let's hope) -- is considering it. Yet Washington is considering a hefty bailout for U.S. automakers -- an industry with much more in common with satellite radio than anyone would like to believe.

Here's why

Ford (NYSE: F), General Motors (NYSE: GM), and Chrysler do not deserve taxpayer dollars. They are poorly run companies that have shown they cannot compete in the global economy. Like satellite radio, they've done nothing but pile up losses and disappoint shareholders for a decade. They're also overburdened by debt and hamstrung by labor relations.
Yet at the same time the financial bailout was being passed in September, Congress approved $25 billion in low-interest rate loans for the "Big 3" to retool their assembly lines to make more fuel-efficient cars. More recently, we're getting word out of Washington that the automakers are back lobbying Congress to get more money, more quickly. They even want access to the $700 billion previously approved for the financial sector. We're also hearing that Chrysler would like the government to subsidize a merger between it and one of its American peers.
Let's be clear: This would not create a healthy company. Instead, it would bail out a terrible investment decision by Cerberus Capital Management (apparently, John Snow wasn't just in over his head at the Treasury Department) and create an even bigger liability for the government down the line.

This is where we draw the line

When we bailed out the financial companies, we didn't like it, but we did it. And at The Motley Fool, we supported the move. In that case, the consequences of inaction would have been severe and far-reaching.
Had there been no rescue package for financial institutions, the credit markets would have frozen up. In turn, the housing market would have collapsed, and healthy businesses small and large would have been unable to meet payroll, finance inventory, or expand. Quickly, America's depression would have spread around the world, as demand for everything from gasoline to toys dried up, paralyzing manufacturing and service sectors. It would have been a global financial apocalypse.
But if Sirius XM or Ford or GM goes out of business, none of that will happen. Yes, a segment of Americans will lose their jobs. But that would not mean the end for auto manufacturing in America. After all, the leading U.S. auto manufacturer isn't Ford, GM or Chrysler. It's Toyota -- a Tokyo-based company that has opened plants in Kentucky, Indiana, California, and Texas.
But autoworker unions and the candidates they support are not keen on Toyota, because Toyota factories are not unionized. In other words, bailout funds would not help a vital part of our economy, but would instead preserve entrenched political interests.

Don't do it

While surviving financial firms such as AIG (NYSE: AIG), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and JPMorgan (NYSE: JPM) may have overreached, they can recover alongside our domestic economy. Unfortunately, the same cannot be said for auto manufacturers, satellite radio, airlines, or any other industry with fundamentally poor economics. Bailing out the automakers would throw good money after bad, in the name of an outdated belief that companies like Ford, GM, and Chrysler are the backbone of the American economy.
This is not the first time our country has been confronted with this choice. At the time of the early-1980s government bailout of Chrysler, David Henderson of the Cato Institute wondered: "Should the U.S. government let Chrysler fail? Let's reword the question: Should the government force taxpayers to subsidize a company whose products do not meet the market test?"
Rather than spend billions to support companies that can't compete in the global economy, Congress should divert some of those funds to help retrain workers who need to find work with companies better suited for success. Call your representatives in Congress and tell them to oppose additional money for the automakers. Our economy needs to be healthy again -- not propped up in its sickbed by another dose of dumb money.

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