Digital Daily » Liberty Media

Sirius Founder: You're 10 Years Too Late, Karmazin

John Paczkowski — Mon, 16 Mar 2009 20:36:36 +0000

Is it too late for Sirius XM? CEO Mel Karmazin and John Malone, whose Liberty Media (LINTA) just tossed the foundering satellite radio outfit a $530 million lifeline, clearly don’t believe so. So do the company’s long-suffering investors who continue to stand by it, though their faith has been sorely shaken.

But the same cannot be said for Martine Rothblatt, the entrepreneur who founded Sirius (SIRI) nearly 20 years ago. She feels Sirius’s chances for real success may have died years ago–dealt a mortal blow by the FCC, which delayed its launch, depriving it of the competitive advantage it might have had over MP3 players like the iPod and later free Internet radio services.

“There has been a huge growth in terrestrial alternatives,” Rothblatt told Fortune. “As we move from third-generation to fourth-generation cellular, there’s going to be ever more bandwidth available to distribute content totally via terrestrial cellular infrastructure. And that will leave fewer and fewer unique market attributes to satellite radio. Technologies have their ideal times and places, and in my opinion the better time for satellite radio was 10 years ago.”

So much for that first-mover advantage…

A grim assessment for Sirius, which had just seemed to be getting an edge on its daunting troubles. But Rothblatt has a point. Internet radio is gaining traction and once cellular networks evolve to the point where they can deliver it to cars and other devices, how can satellite compete? Howard Stern’s going to retire sooner or later…

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Sirius to Shareholders: Put Down the Mylanta

John Paczkowski — Fri, 06 Mar 2009 19:47:08 +0000

Investors holding shares in foundering satellite radio outfit Sirius XM just received a bit of welcome news. The company has closed its investment deal with Liberty Media. “We are excited to have closed the second and final phase of our investment agreement with Liberty Media,” Sirius CEO Mel Karmazin said in a statement. “It is an example of the confidence our that lenders and Liberty have in our business model. These transactions resolve all of the uncertainty surrounding the company’s and its subsidiaries’ debt maturing in 2009.”

Good thing too, because that uncertainty was pretty worrisome. Buried in the company’s recent Notification of Late Filing with the SEC, along with the now standard warning about the souring economy’s effect on business, was this little disclosure:

Management has not yet completed its evaluation as to whether substantial doubt exists relative to the Company’s ability to continue as a going concern for a reasonable period of time. A significant element of that evaluation relates to uncertainties associated with funding of amounts stipulated in the aforementioned Investment Agreements. These uncertainties may not be resolved by the time the Company files its Form 10-K with the Securities and Exchange Commission. In the event such uncertainties remain unresolved, management anticipates that KPMG LLP’s auditors’ report relative to the Company’s 2008 consolidated financial statements will contain an explanatory paragraph indicating substantial doubt about the Company’s ability to continue as a going concern.

In addition to resulting in termination of further funding pursuant to the Investment Agreements, the inclusion of such a paragraph by KPMG LLP would result in a default under certain indebtedness of the Company, XM Holdings and XM Satellite Radio Inc. (“XM Inc.”) which defaults, if not cured or waived prior to the expiration of the applicable grace period, would result in an event of default under other indebtedness of the Company, XM Holdings and XM Inc. Such events of default, if they occur, provide the lenders the right to demand all amounts due under the respective agreements immediately due and payable.

What this means is that if KPMG’s assessment of the company is that it’s not able to continue as a “going concern” and the company had not at that time resolved its debt issues, it would automatically default. Presumably, now that Sirius (SIRI) has closed the Liberty (LINTA) deal, that’s no longer a possibility. Looming crisis averted.

Nasdaq Grants Sirius an Exception

John Paczkowski — Thu, 19 Feb 2009 20:28:47 +0000

Sirius XM’s deal with Liberty Media appears to be moving ahead as planned. This morning the company said that it has received the necessary Nasdaq approval to issue Liberty (LINTA) 12.5 million shares of Sirius (SIRI) preferred stock without shareholder approval. Normally, the company would be required to seek such approval, but because of its dire financial straits Nasdaq has lifted the requirement.

Why So Sirius?

John Paczkowski — Tue, 17 Feb 2009 22:25:01 +0000

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Sirius: Sorry, Charlie

John Paczkowski — Tue, 17 Feb 2009 14:09:46 +0000

Looks like Sirius XM can shelve that bankruptcy filing it’s been preparing these past few weeks–for the time being, anyway. This morning, the struggling satellite radio company announced an 11th-hour deal with John Malone’s Liberty Media that will allow it to meet a Feb. 17 debt deadline that might otherwise have forced the company into Chapter 11 bankruptcy protection. Under its terms, Liberty will provide Sirius (SIRI) with $530 million in loans, a portion of which will be used to repay $171.6 million of its maturing convertible notes, due today. In return, Liberty (LINTA) will receive 12.5 million shares of Sirius XM preferred stock and a couple of seats on Sirius XM’s board.

Not the greatest of terms. Still, Sirius CEO Mel Karmazin has managed to save the company from bankruptcy and from satellite mogul Charlie Ergen without accepting a change in control for the company. And the deal is not subject to the approval of the Federal Communications Commission.

“This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM,” said Sirius CEO Mel Karmazin. “By strengthening our capital structure and enhancing our financial flexibility, this investment allows us to continue providing the great content and innovative programming our subscribers know and love.”

At 20 cents, Sirius shares are up an astonishing 85.89 percent on news of the deal.

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Call Me Mel "Save-My-Own-Keister" Karmazin

John Paczkowski — Fri, 13 Feb 2009 15:49:06 +0000

Sirius XM (SIRI) is ready to seek bankruptcy protection. The company has warned investors that it’s prepared to file Chapter 11. It has hired bankruptcy and restructuring advisers. And it has filled out the necessary paperwork. But it may never file it.

“People familiar with the situation” tell The Wall Street Journal that Sirius CEO Mel Karmazin and satellite mogul Charlie Ergen are moving closer to an accord that would save the struggling satellite radio outfit from having to file Chapter 11. Apparently, Ergen has agreed to allow Karmazin to keep his job if he agrees to a deal, and that’s been concession enough to keep him at the negotiating table, though he continues to pursue an alternative, and perhaps fantastical, deal with Liberty Media (LINTA).

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Liberty Seriously Considering Sirius?

John Paczkowski — Thu, 12 Feb 2009 21:28:17 +0000

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Sirius-EchoStar-Liberty: Ménage-à-Blah

John Paczkowski — Thu, 12 Feb 2009 20:16:56 +0000

As entertaining as news of a Sirius XM-EchoStar-Liberty Media three-way might be, research houses don’t appear to be giving it much credence. Already a few have issued reports dubious of the idea of Liberty accepting the white knight role in this debacle.

In a note to investors this morning, Collins Stewart analyst Thomas Eagan described the possibility of Liberty acquiring or even investing in the struggling satellite radio concern as “highly doubtful.” Explaining his skepticism, Eagan notes, “We do not believe that Liberty initiated the dialogue with [Sirius]. Additionally, we believe [DirecTV] management does not want [Sirius] combined with its operations. [DirecTV] certainly does not need it. Their operations lead the industry.”

Over at Barclays Capital, James M. Ratcliffe and Vijay Jayant are equally skeptical of an alliance between Sirius (SIRI) Liberty (LINTA). “Liberty involvement is more likely an effort by Sirius XM to attract a competing bidder, in our view–we don’t believe the company is fundamentally interested in becoming involved in the satellite radio business,” they wrote, adding that a Sirius bankruptcy is still a distinct possibility. “Chapter 11 would allow the restructuring of above-market OEM revenue share contracts and branded programming contracts, improving operating cash flows,” they explained. “On the other hand, it would result in aggressive competition among the various capital stakeholders and create a significant management distraction for as much as eighteen months.”

For Sirius, bankruptcy may be a more attractive option than cutting a deal with EchoStar’s (SATS) Ergen, but that’s not really saying much. Anyway, Sirius has about a week to decide between the two.

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Sirius: Give Me Liberty or Give Me Ergen

John Paczkowski — Thu, 12 Feb 2009 13:44:01 +0000

The Sirius XM fiasco is fast becoming high drama. Hoping to avoid bankruptcy and fend off an unsolicited takeover attempt from satellite mogul Charlie Ergen’s EchoStar, which has been acquiring its debt, Sirius has approached Liberty Media about a possible transaction. “People briefed on the negotiations” say talks between the two companies are advanced, but it’s not yet clear how much Liberty would be willing to invest in Sirius and whether it’s even interested in taking control of the company.

Like EchoStar (SATS), Liberty Media’s interest in Sirius (SIRI) revolves around the company’s physical assets–satellite and terrestrial repeaters, towers that bolster satellite radio services with Liberty’s DirectTV (DTV) satellite television services. Said Stanford Group analyst Fred Moran: “All of these companies are satellite-delivered media. If you can cross-market, cross-promote and intertwine services between satellite video and satellite audio, you could strengthen your competitive position.”

Question is, is Liberty Media (LINTA) interested in such a thing and is it willing to repay Sirius XM’s debts and buy out the company’s existing shareholders to do it? If it’s not, Sirius may well be forced into bankruptcy, which company officials reportedly claim is preferable to inking a deal with Ergen and EchoStar. Seems Sirius CEO Mel Karmazin can’t bear the thought of giving up control of the company to Ergen.

Sirius shares are trading higher this morning on the news after being viciously beaten down Wednesday by reports that the satellite radio company is mulling a Chapter 11 bankruptcy filing.

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Yahoo Shares Trade South for Winter

John Paczkowski — Wed, 03 Sep 2008 20:44:31 +0000

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TiVo Time-Shifts DirecTV Partnership

John Paczkowski — Wed, 03 Sep 2008 18:44:45 +0000

So, TiVo’s on-again, off-again relationship with DirecTV? It’s on again. After ditching the TiVo (TIVO) platform in Feb. 2007 for a competing personal video recorder made by sister company NDS Group (NNDS), DirecTV (DTV) has circled back to embrace the PVR pioneer’s platform once again. This morning the two companies announced plans to build a version of TiVo’s PVR that can capture DirecTV’s entire lineup of digital and high-def channels. The device will arrive at market by 2009, when it will be offered alongside DirecTV’s existing line of set-top boxes.

Why the sudden interest in a renewed partnership? Could be the recent change in management at DirecTV, which was taken over by Liberty Media (LINTA) in an $11 billion asset swap with News Corp. (NWS) (News Corp. is the owner of Dow Jones and of this Web site). Or could it be that DirecTV simply saw the writing on the wall after TiVo successfully sued Dish for infringing on its patented time-warp technology?

Perhaps a little of both, hmm?