Sirius XM, the satellite radio giant, released it’s earnings reports on November 5, 2009. There were some positive signs that Sirius XM CEO Mel Karmazin was quick to point out. The total number of Sirius XM subscribers increased in Q3 when compared with Q2. Unfortunately for Sirius XM, they lost nearly 400,000 subscribers when compared to Q3 of 2008.
Another positive sign was the $17 million increase in year-over-year revenue. Sirius says it attributes the gain to the sale of best of programming internet packages, and the recent rate increase on subscribers.
The company lost $149,190 in Q3 and for the year Sirius XM has lost $543,145. That loss is a far cry from the $5 billion net loss this time last year due largely to the acquisition of part of the company by Liberty Media.
With a stock price that has steadily increased over the past several months to its current rate af just over $0.60 a share, the company is valued at $2.43 billion. With a low Profit vs. Earnings ratio some investors will say the worst is over for the satelite radio company and the stock will continue to rise gradually.
Before jumping to conclusions, we should keep in mind that Sirius XM has never reported a profit and has a cash flow that is fighting to stay even.
The biggest red flag to any media investor has to be Sirius XM’s debt load. Their liabilities are virtually equal to their assets. Those are not words anyone wants to hear. It means that if Sirius XM’s lenders ever called in all their loans, they could take over 100% of the company. They owe nearly $3 billion in long term debt and their current liabilites stack up to more than $2 billion.
With the overall consumer economy still down, it is hard to know if Sirius XM can sustain it’s subscribership. The Cash for Clunkers program helped get cars off the lot that had Sirius XM as a factory installed feature. When those free trials end, what will happen to the subscriptions? If consumer confidence remains low and unemployment high, peole may choose to live without a radio subscription when local radio stations still provide free programming.
The high cost of operating satelite radio can only be dealt with profitably if people prove they are willing to pay for radio programming, something that is free in every corner of the United States on standard radio receivers. The programming on Sirius XM is the only thing that can place it in a position to gain enough subscribers. So before you invest a dime in Sirius XM, suibscribe to the service for a ltitle while and judge the programming for yourself. If you can’t see yourself paying for it, no one else will either and that is all you will need to know about whether or not to invest.