No guidance from Sirius XM


Mel Karmazin notes that he can’t predict 2009 auto sales any better than anyone else, so Sirius XM is giving no guidance to Wall Street on either revenues or subscriber numbers for 2009. However, the company is sticking with its projection that it will produce over $300 million in earnings before interest, taxes, depreciation and amortization (EBITDA) this year – up from a negative number in all previous years.

Analysts seemed a bit perplexed that Sirius XM could stand behind the EBITDA projection, but not provide any guidance on how it would get there. But company officials insisted that Sirius XM was withdrawing all previous guidance about its financial expectations and subscriber projections, but sticking with the guidance that 2009 EBITDA would exceed $300 million.

CEO Karmazin also refused to be drawn into a discussion of why he and the Board of Directors chose the $530 million investment offer from John Malone’s Liberty Media over that of Charlie Ergen’s EchoStar. He did disclose, though, that those were not the only offers on the table. Karmazin said he didn’t like the coupon on the loan portion of Liberty’s involvement, 15%, but he said that’s where the market is, so he was glad to have successfully dealt with the company’s liquidity issue.

While not giving any numbers, Karmazin is bracing for a difficult year. “2009 will be a terrible year for auto sales. We obviously anticipated that I n our operating plan. We assumed that churn will increase because consumers are facing challenging times. Our budget also reflects that consumer electronics retailers are having trouble bringing customers into their stores. We have a plan that tackles all of these issues,” eh said. “The driver of our financial results in the short term will be extracting all of the benefits from the merger. As you saw in the fourth quarter of ’08 results, financial discipline gets us through the short term. And when auto production goes from nine to 10 million cars produced to 12 to 13 million cars produced, we will see substantial benefits. We are not budgeting that car production will return to historic levels of 16 to 17 million for years to come,” Karmazin added. 

RBR/TVBR observation: Could the net subscriber additions for Q1 turn out to be a negative number? That’s a real possibility after the near flat-line result for Q4. Sirius XM is focused on the financial side this year, controlling costs and capitalizing on merger synergies to produce operating cash flow in a year when subscriber numbers are sure to be unimpressive.