SIRIUS gave preliminary revenues of $283 million and said it had 8.924million subscribers.  XM finished with 9.7 million subscribers at itslast earnings report a couple weeks ago.  Operating expenses, excludingdepreciation and stock based compensation, are expected to remainapproximately flat in the second quarter 2008 as compared to the secondquarter 2007. Second quarter 2008 adjusted loss from operations isexpected to be approximately $24 million, an improvement of 70% fromthe adjusted loss from operations of $79 million in the second quarter2007.

Mel Karmazin gave two interviews recently which offer much moreinsight.  Here is his interview given to FOX BUSINESS NEWS where hecame out positive after buying 2 million shares of common stock.  Hereis his interview on CNBC where Karmazin seemed flat and a littlefleeting to David Faber’s questions.

SIRIUS issued a statement upon the merger closing showing a combinedsubscriber base of 18.5 million and an "annualized" Q2 revenue of over$2.4 Billion.  SIRIUS also reaffirmed its targets, and said it sees2009 synergies of $400 million and 2009 adjusted EBITDA of over $300million. The company is also looking for free cash flow positivenumbers for all of 2009, but it did stipulate that it was beforesatellite capital expenditures.

As far as everything else, what we’d really like to see is a fullyconsolidated page of its total debt refinancings it has just completedand what is still in need to be completed now that it has made so many filings showing various terms.  As this will create thedilution analysis and financial leverage analysis for the months and years ahead, that is going to befar more important than any formal numbers the company gave for itslast quarter.

Jon C. Ogg
August 6, 2008

Sirius is up against several events which could push even more of the current investors out of the shares.

1. Sirius could find that in its merger with XM Satellite (XMSR) the amount of money that can be cut out in a merger is below forecasts. The integration of the two companies might also take longer than forecast.

2. Sirius could find that after the merger is complete that refinancing the combined long-term debt of the company, about $2.5 billion, is nearly impossible in a poor credit market. At the very least, Sirius might have to pay extraordinarily high interest rates or dilute current shareholders.

3. Satellite radio growth rates, already slowing, could drop even further. Most subscriptions come from new car sales. With the auto industry experiencing a tremendous drop-off in sales, Sirius could be badly hurt. Competing products like the Apple (AAPL) iPod and multi-media phones are already undermining Sirius sales.

4. Sirius could loss key management. Now that CEO Mel Karmazin has finished the transaction to combine the two companies and is approaching his 65th birthday, he might elect to leave and have the board bring in someone with more restructuring experience. Investors might well balk at that.

Sirius could easily become a penny stock, and it may not take very long.

Douglas A. McIntyre

Karmazin was on for an entire segment, so these are just someparaphrases for conjecture this morning.  Karmazin did come clean aboutthe length of time that it took to clear this merger has had an impacton the timing of its model, but he also noted that he’s glad to have itclosed rather than not closing the merger.  One such issue he mentionedwas the consumer confusion over having two key brands on the market.

Karmazin noted that the company is now essentially fully funded,although he noted that raising the $1.25 Billion Sirius-XM raised cameat a higher price because of the tough environment right now.  For somepersonal conjecture, it might be advised to not consider this "fullyfunded" comment to mean there is a zero chance that more stock, debt,or other financing sales are coming.  Whether or not that is the case,we’ll know that later down the road.

As far as profitability and "free cash flow positive," Faber sort ofsaid "we’ve been hearing this forever" about next year being free cashflow positive which Karmazin was sticking with.

Karmazin also expects growth this year despite horrible auto sales andhe has said that churn rates haven’t increased much.  He also talkedagain about the $400 million in "synergies" and savings of thecompanies.

Karmazin also noted that the company has more subscribers than almostall US media subscriber services.  In radio they are now only second toClear Channel in revenues for radio revenues and he said Sirius-XM isstill growing rapidly while Clear Channel has no growth.

David Faber asked Karmazin if he is considering a reverse stock split.Karmazin noted that the company "can consider anything" but anyone thatwants to buy the stock should buy it based on the value.

While there were many other comments including the current trends inautos and the lack of churn, the overall oomph has been a veryanti-climactic closing of the merger so far when you consider theextreme time it took to close the deal and considering all of thecontroversy surrounding the deal.

Sirius shares right before the open are up 3.8% at $1.64 on almost 4million shares.  That follows two miserable days of selling.

Now for the long integration plan……

Jon C. Ogg
July 30, 2008

The XM debt offering came to a total of $550 million of 7% principalnotes with a 2014 maturity and are exchangeable at at a rate of 533.333shares of SIRIUS per $1,000.00 face. That leaves a $1.875 conversionprice at simple math levels before any discounting.

SIRIUS is selling up to 262,399,983 shares, and 183,679,988 shares arebeing offered at a fixed price of $1.50 per share and the remaining78,719,995 shares are expected to be offered from time to time afterthe fixed price offering at prevailing market or negotiated prices.Shares are being sold to affiliates of Morgan Stanley and UBS.

The company now has over 18.5 million combined subscribers and its forecasts are the following:

• reiterated prior guidance for the combined SIRIUS XM Radio;
• expects to realize total synergies (net of costs) of approximately $400 million in 2009;
• expects adjusted EBITDA exceeding $300 million in 2009;
• expects to achieve positive free cash flow, before satellite capital expenditures, for the full year 2009;
• expects that both synergies and adjusted EBITDA will continue growing beyond 2009.

Whether or not it can live up to these goals depends upon managementand upon Joe Public in a weak economic and auto environment.Unfortunately you can see with this drop of 16% to $1.57 that investorsaren’t exactly excited about the extra common stock dilution nor aboutthe low implied convertible share price.

JON C. OGG
JULY 29, 2008

Unlike Cramer’s big stance where he thought the combined company was worth a shot, he has a different way he wants to play the success of this merger tonight.

If you have been a Sirius-XM stock bull you aren’t going to like whatJimbo said.  In fact, he said that the combined Sirius-XM common stockis about as safe of an investment return as buying a lotto ticket.  Buthe does have one way he’d like to play it.  Cramer noted that therecent debt offerings were the safer way to play because the combinedoperation is going to be losing money and is beholden unto the debtowners.

He noted that these had a combined loss of $668 million while thecompanies were awaiting the merger approval and the companies areextremely far behind profitability targets that were already expected ifyou go back and review research reports.

The good news for the common stock shareholders is that Cramer did notehe doesn’t think that the company will go bankrupt.  But he’s ratherhold the debt which will get to inherit the company if that occursrather than investing in lotto tickets.

Sirius closed down 16% at $1.88 today on major volume, and shares were down almost 8% at $1.73 after the Cramer-pan.  XM shares closed down almost 12% at $8.17 today on active volume, and shares were down over 7% more at $7.55 in after-hours after the Cramer-pan.

Jon C. Ogg
July 28, 2008

As part of the merger approval, the FCC insisted that the two companies cap their prices to consumers for the next three years. With their major source of subscribers, new car sales, in deep trouble, the ability to raise subscription fees is critical to their revenue growth.

Satellite radio is in a great deal of trouble The share prices off the two companies show that. With a combined $2.5 billion in debt, negative operating income, and plenty of competition that did not exist five year ago, the handwriting is on the wall.

Douglas A. McIntyre

These notes will bear interest at an annual rate of 13% and the priceto investors will be 89.93% of the principal amount of the notes.  Thisgives an effective yield to maturity of about 16%. 

The gross proceeds from the raise are noted as $700,105,050 from thenotes being sold before deducting the initial purchasers’ discounts,commissions, and offering expenses.

The new notes will be guaranteed by XM Satellite Radio Holdings Inc.and is part of a series of transactions to refinance certain debt of XMin connection with the pending merger with SIRIUS Satellite Radio Inc.

To top it off, the offering is structured so that is can be unwound ifthe merger is not consummated. Based on most recent data the merger is believed to be approved, but is still as of 11:35 AM officially in the pending category. 

Jon C. Ogg
July 24, 2008

The companies expect to agree upon several issues as part of a possible Consent Decree, and here are some of those terms:

• Adopt comprehensive compliance plans, and take steps to address anypotentially non-compliant radios remaining in the hands of consumers;
• In the case of XM, within 60 days of the order adopting the ConsentDecree, shut down 50 variant terrestrial repeaters, and shut down orbring into compliance an additional 50 variant terrestrial repeaters;
• In the case of SIRIUS, bring into compliance or shut down up to 11variant terrestrial repeaters within 60 days of the order adopting theConsent Decree.  These terrestrial repeaters were shut off by SIRIUS inOctober 2006;
• Make a voluntary contributions to the United States Treasury ofapproximately $17 million in the case of XM, and approximately $2million in the case of SIRIUS.

The companies are noting that there can be no assurances as to the ultimate outcome of these
enforcement proceedings, including whether the FCC will approve Consent Decrees under discussion with the companies.

Sirius shares are up 1% at $2.71 and XM shares are up about 4% at %10.45.  Both gains are on very light trading volume so far.

Jon C. Ogg
July 24, 2008

Reuters reports that Ford (F) wil keep its small pick-up plant open for two years.

Reuters writes that the head of Microsoft’s (MSFT) online buiness left the company.

Reuters writes that Goldman Sachs (GS) has raised $10 billion to invest in LBO loans.

Reuters writes that Facebook will allow many of its applications to run on outside websites.

The Wall Street Journal writes that Qualcomm (QCOM) and Nokia (NOK) have ended their long-term IP fight.

The Wall Street Journal reports that the collapse of SemGroup, a private oil-marketing firm may have helped the drop in oil prices.

The Wall Street Journal reports that GM’s (GM) global vehicle sales fell 5% in Q2

The Wall Street Journal writes that Credit Suisse (CS) had a sharp drop in net income.

The Wall Street Journal writes that the Actic has vast deposits of oil

The Wall Street Journal reports that Intel (INTC) has brought out a new generation of multifunction chips.

The Wall Street Journal writes that the FCC is near approval of the Sirius (SIRI) merger with XM (XMSR).

The Wall Street Journal reports that Google (GOOG) has launched a rival to online information source Wikipedia.

The Wall Street Journal writes that the drop in oil is taking pressure off the Fed.

The Wall Street Journal reports that the rise in informal loans in China may hurt the economy.

The Wall Street Journal writes that Sprint (S) will sell some of its cell phone towers to pay down debt.

The New York Times reports that the Fed beige book shows the economy gettng worse.

The New York Times writes that Toyota (TM) has passed GM (GM) in global auto sales.

The FT writes that ad sales at The New York Times (NYT) dropped almost 17% last month.

Douglas A. McIntyre

Reuters reports that Wachovia (WB) posted huge write-offs and losses for the last quarter.

Reuters writes that some members of the FCC have voted on the Sirius (SIRI) merger with XM (XMSR), but no final decision has been made.

Reuters reports that the founder of Schwab (SCHW) will step down as CEO but remain as chairman.

The Wall Street Journal reports that Washington Mutual (WM) posted a huge loss but its shares rallied.

The Wall Street Journal reports that NY State will file fraud charges against UBS (UBS)

The Wall Street Journal reports that investors are focused on Apple (AAPL) founder Steve Jobs health.

The Wall Street Journal writes that VMWare (VMW) posted slower growth.

The Wall Street Journal writes that McDonald’s (MCD) earnings may give an indication of whether the US economy is hurting fast food sales.

The Wall Street Journal writes that high food costs are hurting the turnaround at Sara Lee (SLE).

The Wall Street Journal writes that Apple (AAPL) is stepping up its retail push in China.

Carlos Ghosn of Nissan said the auto industry faces more troubles.

The New York Times reports that trouble at Fannie Mae (FNM) and Freddie Mac (FRE) could push up mortgage rates.

The New York Times reports that a federal task force found that speculation was not a major reason for the rising price of oil.

The FT writes that the US Treasury’s plan to rescue Fannie Mae and Freddie Mac could cost $25 billion.

The FT writes that Microsoft (MSFT) has cut a deal to get original short films to run on the Xbox.

Bloomberg reports that CostCo (COST) expects earnings well below estimates.

Douglas A. McIntyre