In a piece published here yesterday, I politely, but firmly rebuffed an article written by TheStreet.com’s Scott Moritz. The reason for my article was not to question the thought that Sirius XM could have troubles in a continued downturn of the economy, but rather the reasoning by which Mr. Moritz came to his conclusion. In my opinion Mr. Moritz’s reasons lacked a solid foundation, and brought up several issues that carry little weight when compared to facts.
In fairness to Mr. Moritz, perhaps he has not taken the time to delve more deeply into the gears that make up the satellite radio machine. Whether we like it or not, some metrics of Sirius XM can be very confusing, and can make projections difficult to say the least. Understanding the workings of the company takes time, and for one reason or another, many (analysts included) take short cuts to arrive at what could be a very flawed conclusion. On the flip side, the conclusion could be right, but the method to arrive there is fraught with error.
Today Mr. Moritz decided to respond to many questions posed to him about the original article. Ironically, he did not deal with any of the REAL issues that were bringing all of the questions, but instead dealt with some selective emails on issues that seem to dodge the intent of the initial article altogether.
Let’s break down the intent and reasoning of the initial piece. Moritz felt that Sirius XM would have problems surviving another economic downturn. To support his stance he offered up accumulated losses, annualized subscriber counts, the debt load held by Liberty. Those were his reasons plain and simple. When it was pointed out that the logic behind those reasons had flaws, he seems to have taken a left turn on the discussion, and now wants to focus on issues that are not related to the initial theory that the company would fall on hard times in an economic downturn.
The Latest From Moritz with my responses bolded
“Sirius, as the story pointed out, turned another corner this year by extending its losses not just in dollars, but now in hundreds of thousands of subscribers. The pay radio player is on track to lose 1.6 million customers as car sales slump in 2009. This doesn’t bode well for the stock. Tech’s hottest cash fire, we wrote, had finally reduced its stock to embers.”
“Michele G. from Wisconsin wrote that we had failed as journalists. “Your role should be to provide information from all perspectives to allow the reader to come to their own conclusion. If you don’t do this you have an ulterior motive and have violated ethical standards.”
Michele’s feedback is a somewhat high-minded version of the usual evil-intent accusations.
One might argue that creating the illusion of balance in a story listing stocks to avoid is somewhat similar to selling luxury services like pay radio during frugal times.
So to be fair, yes, Sirius could sidestep the collapsing auto industry, it could dodge the ad spending slowdown, it could stem some of its subscriber losses, and the company could even lower the flames in its cash furnace.
But the point is, Sirius has serious financial challenges that would be extraordinarily difficult to overcome if the economy continues to tank”
In my opinion, Mr. Moritz starts out by simply insulting Michelle, and writing her off as some conspiracy theorist. There are many things in the market that point to people with ulterior motives. That is a fact of life. However, Michelle was making a point in that Mr. Moritz was offering up some very one sided statements. Something like mentioning the debt to Liberty without mentioning Liberty’s stake in the company is a fact that was very connected to the issue.
Mr. Moritz then goes on to say that balanced reporting would simply be an illusion.
