There are certain companies that probably cannot be turned around no matter who runs them. They tend to be in industries where macro-economic trends are against them, like the buggy whip business 150 years ago.
Investors are not likely to get much out of these firms, unless and until the trend that is hurting them is reversed.
Someone once said "the tape doesn’t lie". Actually, a lot of people did. But, stocks, particularly those that are heavily traded usually reflect most of the news and information about the company. Sirius (SIRI) is trading at $3.88 today. It got as low as $3.73 yesterday, after its big "merger" run to $4.04. But, it now trades back where it did on January 23, and is still down from $7.88 in December 2005.
The issues with the merger go to whether the FCC will approve it. And, what the companies may have to give up. They may have to cap the percent that they can raise rates each year, which would limit revenue potential.
But, as BusinessWeek points out, satellite radio may be yesterday’s product. And outside research would seem to support that: "Josh Bernoff, Forrester Research’s (FORR) savvy new media forecaster, last year did a survey that found that only about 13% of those asked really want satellite radio, a number Bernoff opines would head south in a hurry if the two services started selling ads."
The execution risks of the merger may also be beyond what most investors know. SmartMoney checked around on Wall St. and there are some real skeptics: "[E]ven a cursory analysis of the fixed and variable costs that might be impacted by the merger suggests that the near-term benefits are likely much smaller than what the rosier consensus estimates imply," wrote Bernstein Research analyst Craig Moffett in a research report.
But, the highest hurdle satellite radio has is one that it may not be able to jump. It is the "iPod phenomenon". The devices that consumers use to listen to music and other programming are radically different than they were when satellite radio started to become widely available five years ago. Now content is available over the airwaves to next generation handhelds, Zune’s, iPhones, and all manner of new multimedia device. As municipal WiFi is built out and WiMax networks like the one Sprint (S) is building come online, the ability to get programming on devices other than satellite radio will increase exponentially.
And, even Mel Karmazin can’t fix that.
Douglas A. McIntyre can be reached at email@example.com. He does not own securities in companies that he writes about.