Sirius (SIRI) announced that it ended the year with 8.3 million subscribers, a 38% increase. What it did not mention is that it also exited the year with about $1.3 billion in debt and $2.2 billion in total liabilities.
The Sirius merger with XM Satellite (XMSR) has also been sitting with the federal government for almost a year. The two companies believe that the merger will allow them to cut costs and handle their substantial debt loads.
But, a 38% increase in subscribers may be too slow. Sirius lost another $120 million in Q3. Music publishers and artists want more money for the content that the company broadcasts. Big talent like Howard Stern may ask for more compensation when their programs are being heard on the two merged networks.
Sirius may not see costs drop much right after a merger. It will have to operate two networks because it is not on the same system as XM. Consumer electronics devices like the Apple (AAPL) iPod are being used to provide entertainment in cars. That means satellite radio may have to increase marketing to stay in the game.
Sirius has a long way to go to become viable.
Douglas A. McIntyre