As General Motors goes, so goes Sirius XM, or at least that’s what Wall Street thinks, as it’s been punishing Sirius XM stock even more than usual.
The stock yesterday was down to 16 cents per share. So what would happen to Sirius XM if General Motors went bankrupt?
Analyst Phil Magney of iSuppli said, “If General Motors goes into Chapter 11 and possibly gets pushed into liquidation, everybody is going to lose, frankly — the whole supply chain, Sirius XM absolutely … However, when it comes to Sirius XM, they are available … on nearly every brand of car sold.” His feeling is that satellite radios are embedded in enough cars that satellite radio’s fortunes are not completely reliant on GM. As long as consumers are still buying cars, they will buy satellite radio.
That being said, people are buying fewer cars than even Sirius XM’s conservative forecasts.
Back in August, CEO Mel Karmazin said even if only 12 million vehicles sell this year, the satellite-radio company would win 3 million new subscribers and $350 million. It was a very low target at the time, but now some industry members believe auto sales will track at less than 11 million this year and Magney said the auto decline will continue next year, increasing perhaps in 2010.
That’s a long slog as the company tries to refinance $1 billion in debt when credit is frozen, and when the first $210 million traunch is due in February. And when, dare I say it, iPhones are serving up new competition and mobile WiMax may serve up even more down the road.
So here’s the plus side. Sirius XM said its penetration rate into new cars continues to increase at a healthy clip, reaching 70 percent with Ford, Chrysler and GM.
Sirius XM has also shown its partners a roadmap of future technology which one supplier/partner called “impressive,” although they were not shown any new products for CES in January.
Also, I see as positive the recent barrage of angry blogs from Sirius XM listeners because the company changed its programming last week. Listeners are fully engaged with the service and very attached to their favorite stations. That’s good news and I’m glad to hear it.