As far as earnings, SIRIUS XM made over $71 million for the quarter, or $0.01 EPS.  Sales were up 6.5% at $over $783 million.  Estimates from Thomson Reuters were $0.01 EPS and $785.49 million in revenues.  Revenues were projected to be about $3.3 billion against estimates of almost $3.4 billion.

In short, it was mostly in-line.  SIRIUS XM shares have recovered so much from the lows that it has to beat estimates to keep everyone happy.

The law of large numbers catches up to every company in time.  SIRIUS XM added 542,996 subscribers in the quarter and about 1.7 million in whole year of 2011.  For 2012, that projection is to add 1.3 million, which some price increases may increase churn modestly.

The notion that Sirius XM was started with new coverage at Underweight by Barclays earlier this week is only one more item showing concern.

The positive case: If we are really going to get an explosive auto market later on in 2012, SIRIUS XM stands to win.  Analysts still have a price target consensus of about $2.36 on this stock.  Seeking Alpha has a story titled “Buyback And Takeover Chatter For Sirius; CBS Looks Solid” and that might lure more bulls to tout the stock without even reading the article.

The reality is SIRIUS XM is worth over $8 billion today even after the drop, about 4-times Pandora’s $2.2 billion value.  Pandora is also only expected to report almost $420 million in sales for the year ended January 2013.

With almost 4 billion shares, it is too bad that a reverse stock split would only attract short sellers.  Imagine if SIRIUS XM was able to report earnings of $0.10 ot $0.15 per quarter rather than just a penny each quarter.  It would be a psychological boost.  The short sellers would attack it and the company knows that.  There were already 305 million shares in the short interest as of mid-January and that was the highest short interest reading since last May.

SIRIUS XM is trading down almost 2% at $2.15 against a 52-week range of $1.27 to $2.44.  We have already seen 63 million shares trade hands against an average of 55 million shares a day.  If SIRIUS XM is going to trade down on valuation, perhaps Pandora needs some caution as well unless it can score a massive swing higher in paying subscribers.  Pandora shares are trading down almost 3% at $13.51 versus a post-IPO range of $9.15 to $26.00 and versus a $16.00 IPO price.

As a reminder, investors do have stock options that can be used to hedge this one if they want to stick with it for the long haul.

JON C. OGG

Verizon Wireless, the joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD), did not just sit on its hands while AT&T tried to push through the T-Mobile deal. The company paid $3.6 billion for unused spectrum owned by SpectrumCo, a consortium of Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC), and Bright House Networks.

Other potential AT&T acquisitions include MetroPCS Communications Inc. (NYSE: PCS), Leap Wireless International Inc. (NASDAQ: LEAP), and even Sprint Nextel Corp. (NYSE: S). But none would be as good as a deal for Dish.

AT&T’s main problem is that it would have to pay a premium price for Dish — perhaps as much as $50/share, or about 70% above today’s share price. That would value Dish at around $22 billion, a steep price given that AT&T just paid out $4 billion to T-Mobile in break-up fees. Even Ma Bell can’t afford to pay that kind of money too often for nothing in return, and it’s a sure bet that Dish would want a substantial break-up fee as part of any deal.

A report at Bloomberg News notes that Verizon Wireless owns 56 percent more 4G spectrum than AT&T in the top 10 markets and 46 percent more in the top 100. Verizon Wireless also claims 107.7 million subscribers compared with AT&T’s 100.7 million. Had AT&T been able to acquire T-Mobile, it would have increased its spectrum by 62%, leveling the playing field.

Dish recently acquired wireless spectrum from two bankrupt satellite television companies for about $2.8 billion in a deal that is still awaiting FCC approval. Verizon’s deal with SpectrumCo also needs regulatory approval, and so far there is no indication that either approval is in trouble.

But what does AT&T want with a satellite TV business? Of course it could hive it off once the deal is done, but it might make more sense to go after MetroPCS or Leap, both of which are simply wireless carriers. Or AT&T might be able to get Dish to sell just the spectrum. That would not be the best deal for Dish shareholders, but the company’s management would certainly be able to retire following such a transaction.

Dish shares are trading up more than 2% today at $29.34 in a 52-week range of $20.85-$32.56. Shares of AT&T are up almost 1% at $30.30 in a 52-week range of $27.20-$31.94.

One issue to consider… Dish would have every right in the world to demand another massive deal break-up fee in case the telecom giant could not convince regulators that this is good for consumers.

Paul Ausick

Pandora has also recently signed a deal with satellite TV provider Dish Network Inc. (NASDAQ: DISH).

Pandora does not require a subscription, and the company’s 125 million registered users far outnumbers Sirius XM’s 22 million subscribers. Pandora also claims a 68% share of Internet radio listeners who tune in an average of 18 hours a month, according to reseach firm Triton Digital.

In recent comments at a media conference, Sirius XM’s CEO Mel Karmazin had this to say about Pandora:

Pandora is a really good company. They’ve been around for as long as we have — they’ve been around for about 10 years. They have about 40 million regular users, maybe more now, and they have $300 million in revenue. So, you know, business models matter. We like our business model of subscription better than the advertising-driven model.

Karmazin’s boosterism aside, Pandora and other Internet radio/music services are a real threat to the Sirius XM model. For Internet users, ‘free’ is the model they like best and most are willing to put up with some advertising to get free music.

What Sirius has on its side, though, is a radio model that is understood by the music industry better than the models of companies like Pandora, Spotify, or MOG. Karmazin can leverage that understanding into lower costs for content than the huge upfront fees music companies demand from the likes of Spotify, which offers a hybrid advertising/subscriber model, and has just released its own radio player to compete with Pandora.

Whether Pandora, or Internet radio in general, can displace Sirius XM remains to be seen. If Sirius lowers its subscription price (rather than hiking it) anytime soon, we’ll have our first evidence that Karmazin is more concerned than he lets on.  Maybe radio programs with Howard, Oprah, Martha, and news just aren’t really important… Maybe. 

Paul Ausick

Nuance has been thought of as a potential takeover name for Microsoft Corporation (NASDAQ: MSFT) and for Apple Inc. (NASDAQ: AAPL) on and off for some time.  This may not change the speculation status much.  But what this does accomplish is a new platform to “easily find content by speaking channel numbers, station names, show and movie names.”  This would allow for searching by content, actor, and genre.  The notion that this allows for staying connected through Twitter, Facebook and Skype may just be gravy.

Dragon TV was unveiled as a voice and natural language understanding platform for TV, device and set-top box OEMs and service operators geared toward making it easy to find and access the TV show that a subscriber wants to watch.

If Nuance can open this up to cable outfits Comcast Corporation (NASDAQ: CMCSA) and Time Warner Cable Inc. (NYSE: TWC), and to AT&T INc. (NYSE: T) for its uVerse, let alone DIRECTV, Inc. (NASDAQ: DTV) and Dish Network Corporation (NASDAQ: DISH) for satellite, then Nuance may get a much wider footprint.

How this gets monetized is up for anyone’s guess.  Nuance projected that about 1.6 billion TVs should be connected to the web by 2014 according to Strategy Analytics.  It even notes the difficulty in finding what is on television.  How many times have you been looking for a televised game or show and have no idea what channel it is on?

This will allow OEMs and service operators to deliver TVs, set-top boxes and applications that let consumers find and experience content with Nuance’s leading voice technologies.

Again, the trick is on the monetization.  If it can get a piece of a upcharge for the service then this may open up millions and millions more in revenues per month.  If it is a promotional feature, then this may just be a another brand building effort.

JON C. OGG

The result is about 540,000 subscribers in the fourth quarter added in total and Sirius XM is backing its existing 2011 and 2012 guidance.

With shares up over 20% in the last quarter you might think that the good news was already priced into the stock.  Shares closed down 1.6% at $1.83 to day, but the after hours session has shares up 2.2% at $1.87 in active trading versus a 52-week trading range of $1.27 to $2.44.

The big question remains… With Howard Stern now taking on the judge role for ‘America’s Got Talent’after claiming that he was already being overworked during contract negotiations, is he going to remain as active in his broadcast role ahead? 

JON C. OGG

NBC made the announcement on Thursday where Stern will replace the exiting judge Piers Morgan, but SIRIUS XM is not losing Howard Stern.  Stern will be on both programs and will continue to host his daily radio antics on the satellite radio provider.

Here is where this gets interesting… When Howard Stern was negotiating a new contract with SIRIUS XM a year ago much of the case for more money or for an extended deal was that Stern was overworked, spending far too much time each day on the SIRIUS content, and was tired.  So, did he suddenly get a new burst of energy or start taking energy-boosters?  It is easy to wonder whether or not this increases the odds that Howard Stern could again be a flight risk from the satellite radio that Howard Stern helped to put on the map (and put into space).

The new season returns in summer of 2012.  SIRIUS XM shareholders do not care so far about the news as SIRIUS XM share price is flat at $1.76 and $1.27 to $2.44.

Many of the comments under the full article at NBC showing the full data on Howard Stern are not quite as positive as many of the SIRIUS satellite radio fans might expect.

JON C. OGG

The short interest as of the November 30 settlement date rose more than 11% to  294,696,977 shares versus a reading of 263,937,182 shares based upon the November 15 settlement date.  What is interesting here is that this represents the highest short interest in the number of shares since back at the July 29, 2011 settlement date and it appears to be the third highest short interest reading for the stock in all of 2010.

It was just on December 9 that SIRIUS XM was rated as the Bull of the Day in a very positive upgrade by Zacks Investment Research.  Citigroup had also raised its rating to “Buy” with a $2.20 price target objective.

Maybe the short sellers thought that the holiday sales and retail were going to be weaker than what we have so far seen this holiday season.

SIRIUS shares are up about 1% so far today at $1.765 versus a 52-week range of $1.27 to $2.44.

JON C. OGG

Net income hit $0.02 EPS on $104.2 million and revenue was up 6% to $762.5 million.  The Thomson Reuters estimates were $0.01 EPS and $just over $764 million in revenues.

The most recent earnings report showing that it added 334,000 net subscribers during the last quarter to end with right at 21.35 million subscribers; net adds so far in 2011 have been 1.16 million.  Some were hoping for 350,000 or more in net subscribers. What is more important than the last additions was the projection for the holiday season with some 440,000 net subscriber adds in the fourth quarter.  This earnings report was met with a day where Ford and GM both got hit over less robust car sales figures.

The satellite radio monopoly reported a 16% gain to $197 million in EBITDA and margins are going up as its content costs are actually lower.  The company also expects some $400 million in free cash flow during 2011.

Investors should pay attention to the fact that Mel Karmazin hinted at using extra cash to make acquisitions.  We are also looking at the company’s ongoing roll-out of the certified used car sales market.

Sirius XM may have stumbled a bit on its net subscriber additions, but it should have some strong support in the $1.55 to $1.60 area.

Shares were down only $0.06 at $1.72 by the close on Tuesday when the broad market was way off as well.  That might be considered a win under many circumstances.  Analysts still have a consensus price target objective of $2.30 but that may change at any moment and the group of firms covering it is rather small.

JON C. OGG

S&P’s hike took the rating to “BB” and the outlook is stable from “BB-” rating.  Reasons cited are improved EBITDA, lower debt leverage, improved discretionary cash flow, higher subscriber growth, and rising EBITDA margins.  More importantly, S&P called for a continued recovery in auto sales supporting revenue growth.

Another citation was noted that SIRIUS XM will continue to cut its gross adjusted debt leverage down to “the mid-3x area” by what should be the end of the year 2012 because of EBITDA growth.

One more positive is that, despite S&P cautioning that the company faces significant hurdles to maintaining consistent growth,” it did not exactly warn that Pandora Media, Inc. (NYSE: P) was about to give SIRIUS XM a serious run for its money even though more cars are starting to become “Pandora-enabled” in ads.

SIRIUS XM has been able to keep ratcheting down its borrowing costs and the irony of a credit rating upgrade is that these sort of moves generally allow for cheaper and cheaper borrowing rates in the future.

JON C. OGG

The company noted that the new Latin channels will come with commercial-free music and also will be from leading providers of Spanish-language sports, news, talk and entertainment.

Subscribers can access these new channels through SiriusXM Internet Radio and through the SiriusXM Internet Radio App for smartphones and mobile devices. The company also claims that its new 2.0 technology can deliver about 25% more bandwidth capacity.  The new channels are also available by satellite through the new SiriusXM Edge, the first satellite radio able to receive the expanded programming lineup.

The reason for this expansion is simple.  Spanish-speaking television, radio, and content is growing at a faster rate than any demographic in America.  The SiriusXM Latino channel lineup will now feature exclusive commercial-free music channels covering a wide variety of music genres, including:

• Caliente, channel 150: biggest hits of tropical, salsa, merengue and Reggaeton
• Viva, channel 500: Latin stars in contemporary pop, alternative and ballads
• La Mezcla, channel 503: top hits in Spanish and English,
• Flow Nacion, channel 506: Latin hip-hop and Reggaeton
• Aguila, channel 510: The sound of Norteno bands, Ranchera, Duranguense and the sounds of traditional Mexican music
• Caricia, channel 523: classics from unforgettable artists in Spanish and English
• Luna, channel 530: Latin percussion and Afro-Cuban rhythms blended with Jazz
• La Kueva, channel 540: Latin rock classics and today’s upcoming artists
• RadioFormula Mexico, channel 560, 24/7 news and talk from the leading radio broadcaster from Mexico. 
• It joins on the SiriusXM lineup CNN’s 24-hour Spanish-language news network, CNN en Espanol on channel 148. 
• Playboy Radio en Espanol, channel 569
• Iconic talk show host Cristina Saralegui’s Cristina Radio will feature lifestyle, health and family programming for Latinas, produced by National Latino Broadcasting and launching in the coming months.

More Latino coverage will be Spanish-language sports coverage:

• play-by-play from NFL teams. Play-by-play will be available on multiple Deportes en Vivo channels, XM channels 550-556, which will also carry sports play-by-play from major college programs such as Army, University of Texas, Oregon State University and University of Nevada, among others, as well as an expanded lineup of MLB games. Deportes en Vivo channels supplement existing Spanish-language sports programming on SiriusXM that includes ESPN Deportes Radio, channel 149, which features sports talk and soccer matches from Spain’s La Liga—including FC Barcelona and Real Madrid—the Mexican Primera Division, CONCACAF, Major League Soccer and more.  MLB en Espanol, XM channel 175, will continue to feature Spanish-language broadcasts of MLB games throughout the season. Not all sports programming is available online.

The expanded (English) programming offering from SiriusXM includes: 

• Rock and Roll Hall of Fame Radio
• RockBar
• Classic College Radio
• Red White & Booze
• Krishna Das Yoga Radio
• Carlin’s Corner (in honor of George Carlin)
• UCB Radio (voice to the underground sketch, improv and stand-up comedy)
• Dirty Dog (rude and raucous comedy)
• ESPN SportsCenter

One thing that is interesting is that Sirius XM disclosed in its annual report earlier this year that its letter of intent with ACIR DARS Mexico to pursue a license to offer satellite radio in Mexico was terminated in May 2010.

Edge is on sale now at www.shop.siriusxm.com and  available at 2,500 retail locations nationwide by this holiday shopping season. More programming and expanded listener capabilities will be announced in the coming months as Sirius XM builds upon the new 2.0 technology.  This is also being offered on a $199 annual subscription rate as a savings plan.

Sirius XM Radio shares are up only 1% at $1.83 on the day. 

JON C. OGG