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Sirius XM: Another Analyst Discontinues Coverage

Posted by: Olga Kharif on January 28, 2009

Sirius XM investors just got more bad news. On Jan. 28, Barclay Capital analyst James Ratcliffe announced that he is discontinuing coverage of the satellite radio service provider, “as we believe that the equity price is not being driven by fundamentals or the future of the underlying business, but rather purely by speculation as to the company’s ability to refinance or restructure upcoming debt maturities.”

Ratcliffe, whom I’ve spoken with many times and who is one of the smartest and most thorough analysts I know, argues that forecasting Sirius’s future is akin to reading tea leaves: Everything hinges on the company’s ability to refinance nearly $1 billion in debt due this year, with the first portion due on Feb. 15. While CEO Mel Karmazin has repeatedly said he is confident he’ll be able to refinance the debt, he’s yet to close a large deal — a tough proposition in this economy and with the current state of the credit markets.

Ratcliffe’s note is all the more concerning considering that Lehman Brothers, where he used to be vice president of equity research until September, was an underwriter for Sirius XM in a 2001 share issue. What’s more, Ratcliffe is not the only analyst to discontinue coverage: Goldman Sachs stopped covering the satellite radio service provider last year. Some 12 analysts still cover the company. But today’s announcement seems to indicate further erosion of the financial community’s confidence in the company’s prospects.

That said, there are a few bright spots worth mentioning: Sirius, whose shares are trading around 11 cents, can't get delisted from the Nasdaq until November. Sirius also recently announced it will raise some of its rates in March. As irksome as this step may be to affected subscribers, it could have positive cash implications for the company.

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Reader Comments


January 29, 2009 01:41 AM

Dropping coverage of the company just prior to its February debt coming due and the March 1 date for potential refinance of all 2009 debt is suspect. Show me one company being driven by fundamentals right now.


January 29, 2009 03:52 AM

Barclays is right its purely speculative. With the syenergies gaining force armagedon will soon be here. for either the short or longs Assuming the financial get a lot better in the next couple quarters. and refinancing looks feasible we could see a nice pop in the price when shorts begin covering thier positions. I dont see sirius losing many subscriber s with the rate increase either


January 29, 2009 07:19 AM

CEO Mel Karmazin is (and has been)using smoke and mirrors to keep the company afloat. Both companies, pre-merger, destroyed their businesses in an attempt to out do each other by signing big contracts for programming and talent. The merger of these 2 sick companies makes for 1 big sick company which seems to be the trend in American business these days.


January 29, 2009 08:54 AM

If you needed an analyst to tell you that paying Howard Stern $500,000,000.00 to fart and then charging people a monthy fee and buy a special radio,to hear it as entertainment,send me a signed blank check. No reason. Just send me one. I figure SIRI "investors" must hate money.


January 29, 2009 10:06 AM

I own Sirius stock and have no idea where it will go. But I feel great that “Analysts” from the Lehman Brothers, Goldman Sachs lineage are out. I wouldnt trust any of those sharks to wash my car let alone select my stocks. They are lucky Im not president - because Id have them all up against a firing squad. Including the FCC governors who intentionally hurt the companies by delaying the merger on personal bias.


January 29, 2009 10:10 AM

olga baby this jerk was with Lehman
landed on his feet did he
but why listen to him now
is sirius is the only tea leaf stock today
get serius, I mean serious
ratcliff is well named
a rat on a cliff with a not so hidden agenda


January 29, 2009 10:19 AM

Take 3($) and call me in the morning

Radio Expert

January 29, 2009 10:34 AM

The Company has a flawed Biz Model in the following simple areas that have never been addressed:

1. How can you expect for consumers to purchase in Mass --- Radio Programming where they can get the same for Free via Terrestrial or HD?
Answer not enough "Original Programming" and Content which other than "Howard Stern" and a few other channels most of the Channels offer nothing more than a "copy and paste" programming that you would hear on any other Radio Station without Commercials and it's evident consumers in mass aren't willing to pay for non original programming without commercials in Mass

Cable TV in its incubation stage had more Original Programming than regular TV which is why consumers didn't mind the re-occurring fee.

Providing they ever get New Program Managers and offer more Original Content (that also needs to be marketed) they can begin to turn the ship around in other words Consumers need to purchase Programming that they can't get anywhere else and there are many Ideas that consumers are willing to pay for but Sirius does not offer.

2. Retail Sale of Radios via OEM and Retail markets a base strategy but again for consumers to keep their subscriptions it points to #1 above and then the Internet Biz Marketing Model doesn't exist for I'm sure there are Millions of consumers in other parts of the world who would wish to subscribe via the Internet to hear "Original Content Programming" from America but again the word is "Original Content" so again no driving force their!

3. Affiliate Marketing Distribution - I doubt that this Co. ever heard of this or has any programs partnered with Major Internet Websites for this Biz Model alone if implemented correctly could widely expose the Product and gain subscribers but again prior to initiating one would have to delve back to the core problem and that's revamping what one will listen to on a consistent basis which most of their Music Library's consist of "Top Hits" and their Programming get's very stale after a certain period of listening which could be confirmed by any Survey of consistent listeners.

As the old saying goes you can't keep doing the same thing expecting different results so I would caution that unless they are willing to revamp Programming / Marketing and then delve into New Distribution Channels to many to list then this Ship will sink sadly due to the fact the current Management is probably not willing to even listen to New Ideas and are stuck on what's worked in the past that via these days and times if no one has told them "Change has come to America" and not only in the White House

Radio Expert can be reached at


January 29, 2009 10:55 AM

Who cares if this guy drops coverage he is one of the know it all ass*****we can do without.Goodbye,Goodbye things will go on don't worry.


January 29, 2009 02:02 PM

I used to love XM..then the merger happened. I cancelled my sub and sold my radio. They found a way to keep the worst of both networks and cut the great programs they had. Smart move Mel!!


January 29, 2009 03:55 PM

I wish SRX would have marketed more to the 15-25 year old crowd. I hope it's not too late, but they need a re-do on their image. Too old school. They also have to figure out a monthly package like the cell phone companies market the phone & the service combined in a contract that covers a certain period of time (ex: 2 years).


January 29, 2009 06:52 PM

Sirius is dead. August, sell your stock. 11 cents isn't much, but it's worth more than zero, which is what you're going to get for it if you hold it.

For not a lot of money, I can now stream and listen to internet radio in my car, using my smart phone and a bluetooth device that also transmits in FM frequency. And I never have to pay another penny to do so (other than the data plan I already pay for).

Sirius is obsolete. If they refinance, it just prolongs the outcome.


January 29, 2009 08:17 PM

Octane,Howard,101,CNBC,RILEYMARTIN! If you listen you can't stop listening! I don't get it. I really don't get it. WHY doesn't someone buy them out

Said It Before

January 30, 2009 12:25 AM

At $12.95 a month for what you can get free, or just rip your CD collection, why would anybody stay on with them if they raise their rates. I would join Sat Radio for no more than $5.00 a month. Any amount above that is just crazy. Unless you drive for a living or it takes 2 hours or more to get to work, paying for radio reception is throwing money out the window.
I Remember when they first came out they where saying they would need around one million subscribers per major market to break even, I knew they were in trouble before they started. Then when they signed whats his face for uber millions, I knew they were going down the drain, no plunger is going to clear up this clogged up business model. Do they really think charging more per month will pull in more customers????? DUH??? I have a slight suspicion, that they won't be around next X-MAS. All I can say about the people that sound angry about the coverage being dropped by Ratcliff is that they really sound mad about the money they lost in this investment and they need to blow off some steam. I hope everyone gets their money back, but I really don't see it happening. It was just a poor business model from the beginning, and when they started signing up the big names with the big dollars, well lets just say it would be just a matter of time until the ship sunk!


January 30, 2009 03:47 PM

Amazing, in these times they honsetly belive that raising the price of a descretionary item will draw a larger profit.

I can hear the subscribers calling in and discontinuing service as I type. Then to now charge for their internet site which has been free since it started. Oh well, time to switch, and take all four of my accounts with me. never really listened in the car anyway. So Sirius say goodbye to my $300 per year. I am sure that someone else will step up and fill my slot, oh wait the economy's gone to hell and lots of people are out of work and this is not really a necessary item anyway. hmmm so maybe no one will take my place.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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