Can Sirius Tune Its Way Out Of Financial Disaster?

Sirius XM Radio's best source of business — new car sales — has effectively disappeared. So instead of looking backwards at Detroit's big three, Sirius XM has finally realized it needs to look forward; To new technologies and new ways to monetize its content. Sirius XM, reporting a 94 percent slowdown in subscriber growth year over year, is wisely ditching its reliance on people buying the satellite radio receivers and trying to make its business more accessible.

Now we'll see if this innovation is too little too late, or if it can help the struggling company turn profitable.

In a conference call this morning Sirius XM announced it's planning to stream its radio system to Apple's iPhone and iPod Touch starting this spring. A smart move, aiming to attract new subscribers by giving them the service without making them buy more hardware. It could also keep some existing subscribers hooked, giving them a new way to access their favorite satellite radio stations. Reacting to auto sales, the company is trying to install more of its satellite radios in used cars, although i think that's unlikely to make a significant difference.

Beyond looking to the power of Apple, Mel Karmazin's company, now trading below a quarter, may find more hope in its alliance with DirecTV. Liberty Media, which owns a controlling stake in DirecTV, invested $530 million in Sirius XM last month, saving the company from bankruptcy. CEO Karmizan says the company is looking at the potential to bundle its service with DirecTV's satellite TV, which could be promising.

I'd be curious to see if there are any potential cost savings if the two merge operations.

Sirius reported earnings but refuses to give guidance on revenue and subscriber numbers. Still, Karmizan continues to be optimistic about the big picture, saying he expects the company to turnaround in 2009 after reporting over $300 million in EBITDA earnings this year. Overall, Sirius reported a fourth quarter loss of $248.5 million, better than it's year-earlier loss of $405 million, and on higher revenue than the year-ago quarter. But remember, the company has yet to be profitable.

And the prospects of growing a non-essential consumer business in this recession are anything but strong.

Questions? Comments?