SIRIUS XM reported mixed financial results for the fourth quarter
of 2013, where both the top and the bottom line missed the
respective Zacks Consensus Estimate. Despite strong revenues,
adjusted EBITDA, free cash flow and higher ARPU, SIRIUS XM is
largely dependent on the future of the U.S. auto industry, which at
present is poised for strong growth. The company boasts an
estimated 71% share of the new cars sold. Therefore, even a minor
fluctuation in auto sales may significantly affect the company's
financials. To counter such dependence, management decided to foray
into the telematics business. We believe that the acquisition of
the connected vehicle services division of Agero will be a
long-term positive for the company. Thus, we reaffirm our Neutral
recommendation on SIRIUS XM.
Headquartered in New York, SIRIUS XM Radio Inc. (SIRI) was
founded in 1990. At the time of incorporation, the company was
known as SIRIUS Satellite Radio Inc. On Jul 28, 2008, its wholly
owned subsidiary, Vernon Merger Corporation, merged with XM
Satellite Radio Holdings Inc. As a result, XM Satellite Radio
Holdings Inc. became a wholly owned subsidiary of SIRIUS Satellite
Radio Inc. In Aug 2008, the merged entity changed its name to
SIRIUS XM Radio Inc. The company provides satellite radio services
in the U.S. and Canada. The SIRIUS system consists of 4 in-orbit
satellites, over 125 terrestrial repeaters, satellite uplink
facilities and studios. The XM system consists of 4 in-orbit
satellites, over 650 terrestrial repeaters, satellite uplink
facilities and studios. Subscribers can also listen to music and
other channels over the Internet. SIRIUS XM's satellite radios are
primarily distributed through automakers, retailers and its
SIRIUS XM reports in four revenue generating segments:
Subscriber Revenues: This segment consists of subscription fees,
activation fees and the effects of rebates. The segment generated
86% of the total revenue in 2013.
Advertising Revenues: This segment includes the sale of
advertisements on the company's non-music channels, net of agency
fees and accounted for 2% of the total revenue in 2013.
Equipment Revenues: This segment includes revenues and royalties
from the sale of SIRIUS and XM radios, components and accessories,
accounting for 2% of the total revenue in 2013.
Other Revenues: This segment offers ancillary services, such as
Backseat TV, data and weather services. The segment generated 10%
of the total revenue in 2013.
SIRIUS XM Radio Inc. (SIRI): Read the Full Research
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