Through TheFLY's Eyes: Sirius Satellite Radio Inc.
from Theflyonthewall.com










A Fundamental View

After our technical look at Sirius' (SIRI) results, it appears that the fundamentals are coming together for this start-up. The dynamic duo, Mel Karmazin and Howard Stern, is back and positioning Sirius to become a free cash flow machine (as Mel has always done).

Following tough results from XM Radio (XMSR), it appears Sirius' bet on Howard Stern is paying off. Subscribers increased 149% and Sirius has upped its year-end subscriber target to 6.2 million. Advertising revenue for the quarter increased from $0.5 million last year to $7.0 million in the current quarter. Investors questioned selling ads on satellite radio on top of the monthly subscription fee, but Mel says music is free, other content will have advertising.

Sin Sells

Mel is one of the great cross marketers of all time. Using the attraction of Howard Stern, Sirius is launching the Blue Collar Radio Station, a comedy station. In addition, Sirius has signed a deal with Playboy-- Howard mentioned the Playboy program once and 400,000 subscribers "opted-in" to the program.

Churn is at an incredibility low 1.8%, one of the lowest churn rates this Fly ever remembers for a start-up subscriber-oriented company.

Mel is bringing Stern to the Internet. Subscribers to Sirius will be able to access Howard's show on-line, allowing college students easy access to the show. This, along with other Internet initiatives, is driving triple digit growth, rivaling Rhapsody's success. Therefore, Howard's trashy talk should lead to big growth in ad clicks.

Mel said the company will be cash flow break even by the fourth quarter of 2006, and expects to generate $1.0 billion in free cash flow by 2010. Mel has never missed a cash flow number in his previous positions and he is mostly likely not about to start.