Even with the news that the FCC is almost certain to approve the Sirius (SIRI) merger with XM Satellite (XMSR), shares in the company hit a 52-week low of $1.97. The stock is off about half from its 52-week high. The company’s market cap is down to $3 billion.
With only $252 million in cash and liabilities of $2.3 billion which includes $1.2 billion in long-term debt, Sirius is approaching being insolvent. If its revenue growth continues to drop, its chances of funding quarterly deficits may go away. Last quarter, debt service added to operating loss was $105 million. That means it cash balance is not going to last very long.
The reasons that Sirius is not doing well have been written about too often. Suffice it to say that HD radio and consumer electronics devices like the Apple (AAPL) iPod did their damage.
But, the real murderer of Sirius has been the FCC. It has delayed the merger so long that the two satellite radio companies have bled to death. It wants to cap pricing to the consumer after a merger. That means that the only way for the companies to increase revenue is through the volume of their sales, and the improvement in that figure is disappearing.
Douglas A. McIntyre
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