Is Sirius XM (SIRI) Doomed?

No matter how much its fans attempt to push the share price of Sirius (NASDAQ:SIRI) up, it seems a couple of new bits of negative news manages to push the company down again.

The latest is the lawsuit by shareholders who say the company has reneged on its promise to not increase prices when they were granted permission to merge with XM.

Shareholders claim Sirius has boosted prices as high as 40 percent from the time of that promise.

There is also the lawsuit by Howard Stern which could have a significant impact on the company, especially if things get ugly there.

But probably more important than those one-time events are the health of the auto industry, which while struggling, appeared to be on the move again before the earthquake in Japan has brought it under extreme pressure.

While downplaying the effects at this time in order to keep investors from bolting, auto companies like Ford (NYSE:F), GM (NYSE:GM), Toyota (NYSE:TM) and Honda (NYSE:HMC) are far from certain as to their short term future, as parts are already causing a lot of pressure at the companies, and if that remains to be the situation, it'll dramatically impact the industry, and by extension, the performance of Sirius as well, which is almost completely dependent on it for growth and earnings.

Finally, churn rate at the satellite company has also increased, rising from 1.7 percent in 2007 to 1.9 percent in 2010. Difficult economic conditions could cause that to go even higher, as the price of gas always results in secondary services like Sirius in people's lives to be dropped.

That could happen very quickly if gas prices rise to levels predicted over the summer months.

Much of the positive sentiment from fans of Sirius is based on best-case-scenarios, which are rapidly crumbling under the reality of the forces mentioned above.

Sirius closed Thursday at $1.65, dropping $0.07, or 3.79 percent.

Sirius (SIRI) Antitrust Lawsuit Going to Trial

A antitrust lawsuit filed against Sirius XM (NASDAQ:SIRI) has been ordered to go to trial by a New York judge, with the date set for May 2.

The lawsuit alleges Sirius lied when it said once it merged with XM it would lawyer prices, when claimants say prices have risen as high as 40 percent after the consummation of the merger.

Sirius' argument is the fact the government approved of the merger in the first place removes any claims they have violated monopoly laws coming from less competition.

Sirius said in a statement, "With new competitors emerging almost daily, we continue to believe these claims are without merit and intend to vigorously defend this matter."

The company has also recently been sued by top celebrity Howard Stern, while also being pressured from woes in the auto industry coming from the shortage of parts because of the earthquake in Japan.

Sirius closed Wednesday at $1.72, dropping $0.01, or 0.87 percent.

Stern’s Sirius (SIRI) Lawsuit Overstated Says Citadel Securities

Citadel Securities media analyst Vijay Jayant says in a report that the lawsuit by Howard Stern against Sirius XM Radio (NASDAQ:SIRI) is being "overstated," and he maintains a "Neutral" rating on the stock.

"In his report, Jayant lays out a 'worst-case scenario' for what the potential impact could be from the lawsuit. In this 'worse-case scenario' XM subscribers are included in the 'total' subscriber number. At year-end 2008, Sirius XM had amassed 19 million subscribers. This would place 'total' subscribers at 10 million over the original expectation of 7.2 million subscribers. Jayant estimates this 'worst-case scenario' obligation to Sirius XM would be $370 million. He calculates this by assuming $84 million for every incremental 2 million subscribers in addition to a 10% agent consulting fee. He then calculates in a 5% simple interest rate and comes up with a 'worst-case' potential share award of $425 million. This equates to $0.04 a share (after tax) or about $260 million at current prices. Jayant notes that this potential stock award to Stern could dilute Liberty Capital’s (NASDAQ:LCAPA) stake by -145bp," noted Seeking Alpha.

"While Jayant believes the potential impact from the earthquake in Japan on auto sales, and thus Sirius XM, will be “modest,” he estimates every week of halted vehicle and parts production in Japan could result in -20,000 lower gross subscriber additions. He notes that this would not likely begin until May, assuming auto dealerships hold 2 months of inventory. While he is lowering his 2Q subscriber forecast in light of this, he is also raising his 1Q forecast due to strong vehicle sales in January and February," they added.

Sirius closed the same as the prior trading session on Monday, at $1.72 a share. Jayant has a price target of $2 on the company.




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Closer Look at Sirius (SIRI) Lawsuit from Stern

By now most everyone that follows the media is well aware that Howard Stern’s production company, One Twelve Productions, and his agent, Don Buchwald have filed a lawsuit against Sirius XM Radio (NASDAQ:SIRI). The suit alleges that Sirius and/or Sirius XM Radio have failed to pay certain performance bonuses due to them based on the company’s subscriber numbers.

There are several factors that Sirius XM investors need to consider…

Immediate Impact

The immediate impact began to show through in after hours trading. This is a potentially HUGE lawsuit, worth hundreds of millions of dollars, brought against the company by one of their top on-air personalities. The stock will likely suffer because of this overhang. This is not uncertainty about whether or not Stern will retire or move to another medium, it is uncertainty with massive financial implications. Watch for an immediate negative impact followed by a period of time where the overhang of such a large suit will degrade investment value.

Class Action Suit
Given the language in the lawsuit, there is serious potential that a class action suit against the company on behalf of the shareholders will come up. Stern’s side alleges in the suit that they brought up the bonus issue several times, including during the recent negotiations when Howard signed a new five year deal. It could be argued that the company breached their duty to shareholders by not bringing to light the significant risks associated with these bonus payments.

Sirius was trading at $1.6550, down $0.014, or 0.84 percent, as of 11:52 AM EDT.







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Sirius (SIRI) Sued by Howard Stern

Sirius XM Radio Inc. (NASDAQ:SIRI) is having trouble with its fading star Howard Stern, as he has sued the company via his own production company One Twelve Inc. for allegedly not paying him promised compensation.

Evidently Stern was promised when he signed on in 2006 a number of stock rewards based on the subscriber growth exceeding agreed upon estimates.

Don Buchwald, Sterns agent, filed the suit in New York court. He was allegedly to receive 10 percent of One Twelve Inc.'s compensation.

“When Sirius needed Stern, it promised him a share in any success that the company achieved,” according to the suit. “But now that Sirius has conquered its chief competitor and acquired more than 20 million subscribers, it has reneged on its commitment to Stern, unilaterally deciding that it has paid him enough.”

The plaintiffs are seeking unspecified amounts with interest.

Sirius closed Tuesday at $1.71, down $0.01, or 0.87 percent.

Sirius (SIRI) Dying? Howard Stern Reducing Work Schedule

In yet another blow to the long-term viability of the business model of Sirius XM Radio (NASDAQ:SIRI), Howard Stern said in an interview with Rolling Stone that the new contract he operates under allows for him to reduce his work schedule, implying it's something he's definitely taking into consideration.

Stern said he could work at “about three shows a week.” Immediate response from some fans of the show and Sirius were of disappointment.

Stern said, ”When it came down to sort of figuring out what I was really after, I was pretty sure I was going to leave the radio…I thought I’d kind of done what I needed to do. I still enjoyed it, but I also found that I wanted time to do some other things. Right now, my schedule is pretty much the same as it’s always been. And then as time rolls on I’ll probably do about three shows a week.”

At that time Sirius will definitely need to generate more more shows and interest to justify their price for its service, as it appears we're entering into another period of high gas prices which cause consumers to take austerity measures which have resulted in cutting back on Sirius' service in the past.

One show less of Howard Stern, for some fans, will be more than enough to cut the service.

Sirius was trading at $1.725, up $0.015, or 0.88 percent, as of 1:31 PM EDT.

Sirius (Nasdaq:SIRI) Debt Boosted by Standard & Poor's Ratings

Sirius XM Radio Inc. (Nasdaq:SIRI) was upgraded by Standard & Poor's Ratings, raising the rating to BB-, still 3 steps away from investment grade.

The reasons cited for the debt-rating upgrade was improved debt levels (although still high), return of Howard Stern to the fold, and increased earnings.

Expectations on leverage for Sirius going forward is it'll lower over the next couple of years. More increases in their credit rating would help with costs, as interest rates would be lower.

Some concerns are the over reliance of Sirius on Howard Stern, who had more leverage for contract talks than he should have because of a relatively meager lineup.

Sirius needs to line up more and diverse talent to ensure they can negotiate from a stronger position in the future, or it's hard to see how they could be considered a legitimate business to invest in.

Even their monopoly can't force people to accept a service that has little more than the likes of Howard Stern to drive it.

Sirius (Nasdaq:SIRI) Lands Howard Stern for Another 5 Years

Shareholders of Sirius XM (Nasdaq:SIRI) are surely sighing with relief at the news Howard Stern has signed on with the satellite radio company for another five years.

Details of the contract weren't revealed by Stern weren't revealed, but he did say it offered him more flexibility, suggesting it may be less than the prior contract, but that's supposition at this time.

Stern said, "The contract allows for me for a new flexible schedule. I'll have more flexibility. But I'll get into that in the future."

The prior schedule was for four days, which means it may have been whittled down to a three-day work schedule.

Stern's staff will negotiate their contracts with Sirius on an individual basis.

Sirius was trading at $1.39, up $0.08, or 6.08 percent, as of 2:16 PM EST.

Talks with Howard Stern Getting Sirius (Nasdaq:SIRI)

Speculation is rampant over the battle between Sirius XM Radio(Nasdaq:SIRI) and Howard Stern over renewing his contract, which has been $500 million before.

The existing contract with Stern expires on December 31, 2010, but the last show of his will air on Sirius XM on either December 16 or 17.

With revenues for 2009 coming in at $2.47 billion, it's hard to believe Sirius could seriously consider paying Stern a package like they did before. It underscores the value of Stern to the company, but also a weak business model that relies so much on one personality. It makes for a very risky investment, even with the monopoly position they enjoy.

Revenue estimate for 2010 for Sirius XM are $2.83 billion, and for 2011, $3.10 billion.

Some believe if Stern leaves, it could dramatically change the performance metrics of Sirius, underlining again the need for Sirius to attract additional talent to the business model.

One thing Sirius could do is file what is called a CT ORDER with the SEC, which would effectively treat Stern's contract as confidential data. But that would seem to undermine the company and its integrity, as how would investors respond to the single most important element of Sirius being hidden from them. It makes no sense from an investment standpoint.

Operationally, Sirius has been doing other things right, as they'll grown their subscriber base while lowering their churn rate, while also pushing their costs down.

There is only about three weeks left for a decision to be made on Stern, and either way will probably be considered a negative on the company, depending on what a Stern deal would involve if he is resigned.

Sirius closed Wednesday at $1.32, down $0.04, or 3.31 percent.