A Takeover Of Sirius (SIRI): Buying What No One Wants (DISH)(AAPL)

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It is hard to understand why anyone would want to buy Sirius XM (SIR). All it has left is Howard Stern and he will probably leave soon enough.

Sales at Sirius are being hurt by the downturn in the car market. The satellite radio firm had an operating loss of $4.8 billion in the September quarter due to write-downs. Without the accounting action, the company would still have lost about $50 million. Revenue and subscriber growth are both slowing. SIRI also has a lot of debt due this year.

All of that makes Sirius a queer takeover candidate.

The management of EchoStar (DISH) must see something in Sirius that no one else does. According to The Wall Street Journal, "EchoStar, has recently acquired part of a $300 million tranche of Sirius debt that matures on Feb. 17." DISH management is not foolish enough to think it will make money on the debt. It is using the purchase to try to takeover Sirius without having to go to shareholders and the board.

The EchoStar move is clever, perhaps too clever. Sirius has debt extending well beyond this year. If the company does not go bankrupt someone will have to pay that, even if it is at a negotiated discount.

No matter who ends up with the satellite radio firm or its assets, the Sirius business will probably never be viable. Consumer electronics like the Apple (AAPL) iPod and multimedia phones are eating up too much of the market. Digital radio has, to some extent, resurrected that old medium.

Sirius is dead. Unless DISH has some special use for its technology, it is hard to see why Echostar would want the corpse.

Douglas A. McIntyre

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