Credit: Shutterstock photoSummary:
Sirius XM reported mixed financial results in the third quarter of 2014, with its bottom line meeting the Zacks Consensus Estimate and the top line surpassing the same. The company is largely dependent on the future of the U.S. auto industry, which at present is poised for strong growth. Therefore, even a minor fluctuation in auto sales may significantly affect the company's financials. To counter such overdependence, management has decided to foray into the telematics business. We believe that the acquisition of the connected vehicle services division of Agero is a positive move by the company. However, increased leverage coupled with stiff competition from other rival players will act as headwinds for the company while moving ahead. Thus, we reaffirm our Neutral recommendation on Sirius XM .
Overview:
Headquartered in New York, Sirius XM Holdings 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 websites.
The company 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.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
