Sirius Presentation

Tonight, my MBA group and I will be giving a presentation on the Sirius Satellite Radio company. We are taking an advanced managerial finance class, and we were assigned to review a company and identify the red flags that indicated the business was about to encounter trouble. We were allowed to pick the company to review, and our group chose Sirius.

Sirius was incorporated in 1990 for the purpose of distributing musical content view satellite broadcast. In 1997 they received their FCC license to broadcast, and they completed the installation of their three satellite constellation in 2000. After a couple of years of testing, Sirius started generating revenues in 2002. Although the company has never been profitable, they hope to be soon. They currently have over 250,000 subscribers, which is far behind XM, their US rival, who has over 1.5 million subscribers. I am a Sirius subscriber, and I really enjoy the service, but it seems that no one knows who they are, or that they even exist. XM has done an excellent job of marketing themselves, and that is where Sirius has failed.

I've been stressing all weekend over this presentation. Our instructor was out sick for two of our class periods, and since we only have 8 class meetings for the course, that is a pretty big deal. Our grade is based off of two quizes, the presentation, and our final. That means that we need to do well on this presentation so I can maintain my 4.0. Our group has been a little stressed because we can't seem to find any smoking guns that would explain why Sirius is having trouble. They aren't profitable, but all of the financial indicators we learned in class show that they have a solid business fundamentally. If they ever get enough subscribers (maybe by 2005) they should be a very profitable and successful company. We were hoping to find a lot of information that would explain why, in the 14 years since they started, that they have never shown a profit. That info just wasn't there. The fact that Sirius has only been generating revenues for two years didn't help either, as there was very little information to research.

On Sunday our group got together to finalize our presentation. I was pretty relieved after the meeting. It looks like we all came up with some good information that we can use. We each focused on different areas of the company. I focused on subscriber rates and the revenues / expense per subscriber. It was really interesting to learn how much information is freely available on public companies. If you have never tried, go check out the SEC website and search the EDGAR reports for the company you work for, or if your company is private, a company that you invest in. You can find all of their annual and quarterly reports, changes in ownership, stock sales, bond issues, and a treasure trove of other information.

Now that we are nearly done with this project, I'm very tempted to buy 100 shares in Sirius. They currently trade for under $4, and if they ever get enough subscribers, I can see their stock price really taking off. Still, it is a big risk. They have defaulted on one of their loan payments already, and if they don't get enough subscribers soon, they won't be able to make their interest payments. I think that Q4 2005 will be the turning point for Sirius. After 2005, they will either be bankrupt, or have enough subscribers to be successful.