Sirius (SIRI) does not need competition from XM Satellite (XMSR), Apple’s (AAPL) iPod, or HD radio to put it out of business. The US government is doing the job nicely.
While it clear that the Department of Justice and FCC are sitting on a decision about the merger of the two satellite radio companies. What is not clear is why.
Some analysts say that the deal and its many technology pieces are complex and that judging what will happen to consumer choice for in-car entertainment is difficult. Given the resources available to review the marriage, that would seem unlikely. It may be the FCC does not want to take on Congress about whether the agency would be creating a monopoly. Sit on a deal long enough and it might go away. SIRI and XMSR could decide that the price of waiting much longer is not worth it.
What is abundantly clear is that Wall St. expects Sirius to keep losing money which it does not have. Current estimates are for a $.13 lose for Q4 07 and a $.29 loss for full year 2008. The company has long-term debt of almost $1.3 billion and at the end of Q3 had about $390 million in cash. At the current rate of losses, Sirius could be low on cash before the end of the year.
Sirius and XM may have to kill their deal and move into the capital markets separately to raise money. In the current credit markets, that will be very difficult, but they can not do it as a "merger in waiting".
With their current cash burn rates, they are almost out of time.
Douglas A. McIntyre
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