(By Marty Biancuzzo) When Sirius XM Radio Inc. (Nasdaq: SIRI) reports its first-quarter results early today (Thursday) investors will be looking for two things: An operational sense of direction from the newly merged satellite radio player, and any insight on the opportunities that might emanate from Liberty Media Holding Corp.’s (Nasdaq: LINTA) recently taking a 40% stake in Sirius.
Investors who wish to evaluate the quarterly report should focus on there things:
- Whatever the company is willing to provide in terms of subscriber numbers or subscription trends.
- Cost-cutting or cost-management initiatives and results.
- And adjusted earnings (earnings before income taxes, depreciation, and amortization, also known as EBITDA).
Let’s take a look at each of the three.
Sirius Subscribers: Sirius subscriber numbers will be a good indication as to where the company is heading. In November, Chief Executive Officer Mel Karmazin said he expected subscribership to increase to 28.4 million by 2013. Sirius has 19 million subscribers at the end of last year and expects to close 2009 with 20.6 million, Karmazin said at the time.
Subscribership is based on two key factors: U.S. auto sales, and the state of the consumer-driven U.S. economy.
Auto sales are on a steady decline with Chrysler LLC in bankruptcy and General Motors Corp. (NYSE: GM) potentially facing a similar fate. Fewer car sales means fewer subscribers joining the Sirius service, since the auto sector is a big source of new business for the satellite radio provider. Ford and GM both experienced 32% sales declines.
”Satellite radio’s growth has grown increasingly dependent on OEM automotive distribution,” said Stanford Group analyst Frederick Moran. “Automotive sales have fallen to the lowest levels in decades.”
The U.S. recession won’t help, either. Satellite radio is considered more of a luxury than a necessity. Last quarter, Sirius saw its gross additions slip 7% despite the holiday season. All signs point to margins getting squeezed.
