SIRIUS XM Radio Inc.
), the largest satellite radio broadcaster in the U.S., is set to
diversify its business model from a pure radio entertainment
provider to a Web-based safety and navigation information
provider for cars. Recently, the company decided to acquire the
connected vehicle services unit of Agero Inc. for a total
consideration of $530 million in cash. The deal is expected to be
completed by the fourth quarter of 2013 subject to the customary
Agero's connected vehicle unit provides several telematics
services, including driver alerts, vehicle maintenance
information and location based content for traffic information,
nearby gas stations or restaurants information, along with
navigation help and voice texting services. The company has
strong telematics partnership with almost all major car
manufacturers including Acura, BMW, Honda, Hyundai, Infiniti,
Lexus, Nissan and Toyota.
The deal will enable SIRIUS XM to offer both satellite
services and wireless services. Last month, the company entered
into a partnership with
) to offer emergency support, stolen vehicle tracking and
roadside assistance to all connected cars in North America
manufactured by Nissan Motors. SIRIUS XM currently offers
satellite-radio broadcasting services in more than 50 million
cars in the U.S. This figure may double with wireless-based
telematics services in its kitty.
Moreover, the acquisition of Agero's telematics services will
help SIRIUS XM to counter the growing competitive threat in the
in-vehicle broadcast radio entertainment segment.
Pandora Media Inc.
), the largest online radio streaming service provider in the
U.S., and the upcoming iTunes online radio service of
) have become major threats for SIRIUS XM.
In this situation, diversification into a growing telematics
segment will definitely help the company to sustain its growth
momentum. Several industry researchers have estimated that the
telematics market, at present, offers a $4.2 billion opportunity.
SIRIUS XM currently has a Zacks Rank #3 (Hold).
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