Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Will XM, Sirius Merger Amount To Dead Air?


Satellite radio deal receives FCC approval.


Sirius Satellite (SIRI) and XM Satellite (XMSR) announced plans to merge more than a year ago. Since that time, the combination has been held up pending regulatory approval. But all that may be about to change. The deal earned a nod from the Department of Justice earlier this year and on Monday, according to CNBC, "Federal Communications Commission Chair Kevin Martin recommended approval of their merger." The union must now be blessed by three of the five FCC commissioners.

There's no guarantee that will happen, but the overarching sense is that a final vote (and greenlight) could come within a month or so.

But who cares? Here's what turns me off about the pairing.

There was a fair amount of excitement when the two first announced plans to wed, but because the deal was tied up in red tape for so long the novelty wore off, the stocks struggled and investors turned their focus to more actionable opportunities. Now the current lack of excitement suggests that few investors will be interested in hopping the bandwagon and still fewer analysts will be inclined to pick up coverage if and when the deal receives a seal of approval.

Earnings, likewise, are an issue. The analyst community is expecting Sirius to lose money in 2008 and 2009. Ditto XM. Why would anybody be optimistic that, at least in the near-term, it would be any different if they were joined at the hip? This could turn off both institutional and retail players.

Third, consider the extent to which the technological landscape has changed since the deal was first announced. The iPod as become the means of listening to uninterrupted music and songs are both easy to come by and download. Apple's (AAPL) relationship with automakers such as Ford (F) and General Motors (GM) should have the satellite companies particularly worried.

Certainly, this isn't going to be an obstacle for listeners who sign up just for Howard Stern, but the iPod revolution could very well make it more difficult for the combined entity to pick up other subscribers.

Finally, there's that pesky issue of a waning economy. Sirius' service runs about $12.95 per month. Not terribly expensive, to be sure, but given the rising cost of fuel and food folks might be reluctant to pony up on a monthly basis, especially if they own an iPod and can tune in to good old AM or FM at no charge.

XM was up was up $0.43, or 3.96%, on the news. Meanwhile, Sirius was up $0.08, or 3.15%, on the news.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos