Post by doc on Feb 12, 2009 0:30:19 GMT -5
Sirius XM drops 50% on reports of possible bankruptcy
By David B. Wilkerson, MarketWatch
Last update: 4:05 p.m. EST Feb. 11, 2009Comments: 189CHICAGO (MarketWatch) -- Shares of Sirius XM Radio Inc. fell 50% Wednesday on reports that the company could be close to filing for bankruptcy, suggesting that the severe economic downturn might be too much for even radio mastermind Mel Karmazin to overcome.
The shares (SIRI:sirius xm radio inc com
News , chart , profile , more
Last: 0.06-0.06-51.71%
4:00pm 02/11/2009
Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
SIRI 0.06, -0.06, -51.7%) fell 6 cents to close at 6 cents. The stock, avidly followed by day traders, was in the $4 range two years ago.
The decline of U.S. auto sales, exacerbated by the financial crisis of recent months, has hurt many media outlets that depended on the big ad budgets of automakers. For Sirius XM, fewer car sales simply have meant fewer activations of satellite-radio service.
In February 2007, satellite-radio providers Sirius and XM, both of which had been losing millions of dollars per quarter for several years, announced that Sirius would acquire XM in a $13.6 billion deal. After a protracted regulatory review, the transaction was completed last July.
To facilitate the acquisition of XM, Sirius took on a massive amount of debt, and the combined entity has continued to struggle. It had $2.8 billion in long-term debt as of Sept. 30, with about $360 million on the balance sheet.
In the third quarter of 2008, Sirius XM lost $4.88 billion, or $1.93 a share. Subscribers rose 17% from the year-earlier quarter, but the company said declining auto sales had slowed its growth.
Karmazin was brought in to run Sirius in 2004, and he became chairman of the combined company. He had made Infinity Broadcasting into a radio powerhouse that was acquired by CBS Corp. (CBS:CBS Corp New
News , chart , profile , more
Last: 5.88+0.21+3.70%
4:02pm 02/11/2009
Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
CBS 5.88, +0.21, +3.7%) , and then ran highly profitable CBS radio and TV stations until an advertising downturn that began in 2001 led to an acrimonious departure from Sumner Redstone's Viacom-CBS family.
"It's going to be fashionable in a lot of quarters to criticize the Mels of the world," said Donna Halper, a veteran radio-programming consultant and assistant professor of communications at Lesley University in Cambridge, Mass.
'Right now, a lot of people are trying to cut down on their spending, and satellite radio is one of the things that's expendable.'
— Donna Halper, Lesley University
"But nobody saw this downturn coming," she added. "There was no reason to believe the good times were going to end for satellite radio. They had a great niche, and they came along at a time when terrestrial radio had killed the goose that laid the golden egg. They were syndicating five people on 660 stations, instead of doing what makes radio great -- live and local [personalities]."
This worldwide financial meltdown is different from anything most media people have witnessed, Halper elaborated. "[Karmazin] is used to finding a way [to make things work]. But this is a time when there's no way to be found. The only thing to do is wait it out, and hope you have a product that people find appealing. But right now, a lot of people are trying to cut down on their spending, and satellite radio is one of the things that's expendable."
Many costs to overcome
XM and Sirius had been formed in the late 1990s. Though there was some skepticism whether people would pay for radio when it was available for free, as it had been for decades, the satellite services gained traction by convincing auto manufacturers to make them available as options in cars and trucks. Sirius and XM radio units also were available in retail stores.
Each provider offered more than 100 channels of music or talk, across a wide array of genres. The services were not interoperable, so that a buyer of XM equipment could not receive Sirius' service or vice versa.
Between them, they eventually attracted several million subscribers, including some listeners who had become disillusioned with conventional broadcast radio. The rapid consolidation of terrestrial radio, made possible by the 1996 Telecom Act, helped create a perception that formats and playlists had become stale, with hundreds of stations owned by the same company sounding virtually the same.
However, Sirius and XM lost millions of dollars each quarter, weighed down by marketing costs and other expenses. They took on big sports contracts with leagues such as the NFL, Major League Baseball and the NBA.
Sirius hired the outspoken Infinity Broadcasting morning personality Howard Stern -- who Karmazin had once mentored -- in a highly publicized move that raised the profile of both companies, but saddled Sirius with a fat contract for the shock jock and significant costs associated with publicity. XM then ratcheted up its marketing efforts to combat the barrage of hype surrounding Stern.
Papers practically ready
Sirius XM is working with bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett, and Joseph Bondi, a restructuring expert, to set up a Chapter 11 filing that could come in the next few days, the New York Times reported on its Web site Tuesday evening, citing an unnamed person it described as familiar with the situation.
Documents and analysis are almost finished, the Times said.
The Wall Street Journal mentioned the same names, citing two unnamed persons close to the matter, in its online edition.
A Sirius XM spokesman declined comment Wednesday afternoon.
The Journal reported this week that Charlie Ergen, head of satellite provider Dish Network Corp. (DISH:dish network corp cl a
News , chart , profile , more
Last: 12.98-0.17-1.29%
4:00pm 02/11/2009
By David B. Wilkerson, MarketWatch
Last update: 4:05 p.m. EST Feb. 11, 2009Comments: 189CHICAGO (MarketWatch) -- Shares of Sirius XM Radio Inc. fell 50% Wednesday on reports that the company could be close to filing for bankruptcy, suggesting that the severe economic downturn might be too much for even radio mastermind Mel Karmazin to overcome.
The shares (SIRI:sirius xm radio inc com
News , chart , profile , more
Last: 0.06-0.06-51.71%
4:00pm 02/11/2009
Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
SIRI 0.06, -0.06, -51.7%) fell 6 cents to close at 6 cents. The stock, avidly followed by day traders, was in the $4 range two years ago.
The decline of U.S. auto sales, exacerbated by the financial crisis of recent months, has hurt many media outlets that depended on the big ad budgets of automakers. For Sirius XM, fewer car sales simply have meant fewer activations of satellite-radio service.
In February 2007, satellite-radio providers Sirius and XM, both of which had been losing millions of dollars per quarter for several years, announced that Sirius would acquire XM in a $13.6 billion deal. After a protracted regulatory review, the transaction was completed last July.
To facilitate the acquisition of XM, Sirius took on a massive amount of debt, and the combined entity has continued to struggle. It had $2.8 billion in long-term debt as of Sept. 30, with about $360 million on the balance sheet.
In the third quarter of 2008, Sirius XM lost $4.88 billion, or $1.93 a share. Subscribers rose 17% from the year-earlier quarter, but the company said declining auto sales had slowed its growth.
Karmazin was brought in to run Sirius in 2004, and he became chairman of the combined company. He had made Infinity Broadcasting into a radio powerhouse that was acquired by CBS Corp. (CBS:CBS Corp New
News , chart , profile , more
Last: 5.88+0.21+3.70%
4:02pm 02/11/2009
Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
CBS 5.88, +0.21, +3.7%) , and then ran highly profitable CBS radio and TV stations until an advertising downturn that began in 2001 led to an acrimonious departure from Sumner Redstone's Viacom-CBS family.
"It's going to be fashionable in a lot of quarters to criticize the Mels of the world," said Donna Halper, a veteran radio-programming consultant and assistant professor of communications at Lesley University in Cambridge, Mass.
'Right now, a lot of people are trying to cut down on their spending, and satellite radio is one of the things that's expendable.'
— Donna Halper, Lesley University
"But nobody saw this downturn coming," she added. "There was no reason to believe the good times were going to end for satellite radio. They had a great niche, and they came along at a time when terrestrial radio had killed the goose that laid the golden egg. They were syndicating five people on 660 stations, instead of doing what makes radio great -- live and local [personalities]."
This worldwide financial meltdown is different from anything most media people have witnessed, Halper elaborated. "[Karmazin] is used to finding a way [to make things work]. But this is a time when there's no way to be found. The only thing to do is wait it out, and hope you have a product that people find appealing. But right now, a lot of people are trying to cut down on their spending, and satellite radio is one of the things that's expendable."
Many costs to overcome
XM and Sirius had been formed in the late 1990s. Though there was some skepticism whether people would pay for radio when it was available for free, as it had been for decades, the satellite services gained traction by convincing auto manufacturers to make them available as options in cars and trucks. Sirius and XM radio units also were available in retail stores.
Each provider offered more than 100 channels of music or talk, across a wide array of genres. The services were not interoperable, so that a buyer of XM equipment could not receive Sirius' service or vice versa.
Between them, they eventually attracted several million subscribers, including some listeners who had become disillusioned with conventional broadcast radio. The rapid consolidation of terrestrial radio, made possible by the 1996 Telecom Act, helped create a perception that formats and playlists had become stale, with hundreds of stations owned by the same company sounding virtually the same.
However, Sirius and XM lost millions of dollars each quarter, weighed down by marketing costs and other expenses. They took on big sports contracts with leagues such as the NFL, Major League Baseball and the NBA.
Sirius hired the outspoken Infinity Broadcasting morning personality Howard Stern -- who Karmazin had once mentored -- in a highly publicized move that raised the profile of both companies, but saddled Sirius with a fat contract for the shock jock and significant costs associated with publicity. XM then ratcheted up its marketing efforts to combat the barrage of hype surrounding Stern.
Papers practically ready
Sirius XM is working with bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett, and Joseph Bondi, a restructuring expert, to set up a Chapter 11 filing that could come in the next few days, the New York Times reported on its Web site Tuesday evening, citing an unnamed person it described as familiar with the situation.
Documents and analysis are almost finished, the Times said.
The Wall Street Journal mentioned the same names, citing two unnamed persons close to the matter, in its online edition.
A Sirius XM spokesman declined comment Wednesday afternoon.
The Journal reported this week that Charlie Ergen, head of satellite provider Dish Network Corp. (DISH:dish network corp cl a
News , chart , profile , more
Last: 12.98-0.17-1.29%
4:00pm 02/11/2009