Sirius (SIRI): Some Upside

Sirius (SIRI) management has been desperate to convince shareholders that the merger of the two satellite radio companies would work. Wall St. has not bought into the pitch, but there are two or three things that could change that. None of these is short-term. Sirius now trades at $.68, down from a 52-week high of $3.94. There is a question of whether it can maintain its listing on the NYSE.

The hardest issues Sirius has to face are the slowdown in the car industry and the dead credit markets. Sirius as over $2 billion in short–term debt and it needs to refinance at least a portion of that. The car sales market in the US will not be getting better over the next two or three quarters, so Sirius is limited in the positive news it might be able to generate. 

Sirius shares almost certainly go up if the company can beat the savings it has estimated for combining the two companies. The first look at this comes in about six weeks when Sirius announces earnings. If Sirius shows that margins can be improved beyond initial forecasts, it will have proved a lot of its case for expense management.

Sirius also may get a break from the $700 billion bank bail-out. If it eases credit as the Treasury claims it will, Sirius has a chance to improve its balance sheet something in the next several months. At $.68, Sirius may finally have some upside.

Douglas A. McIntyre