CHICAGO — It’s hard to cite Sirius XM Radio Inc.’s most daunting challenge: Is it the $1 billion in debt payments, a bad economy or plummeting new-car sales, the satellite radio company’s biggest avenue for new customers? And what about the next big threat, free Internet-enabled audio choices?
Last week, Sirius XM noted in a regulatory filing that sluggish auto sales “have negatively impacted subscriber growth” and that it is in discussions with lenders regarding new financing options. It said “such financing may not be achieved or, if achieved, may not be achieved on favorable terms.”
Just a few months after its merger was approved, Sirius XM Radio “faces an issue of survival,” said James Goss, an analyst with Chicago’s Barrington Research. “I’m trying to be realistic, but the question is, do you believe they will survive?” He believes Sirius XM will survive, and he has an outperform rating on its shares. Other analysts have downgraded the stock.
Sirius stock has lost 91 percent of its value in 2008, closing Thursday at 26 cents, unchanged from its opening price.
Sirius XM did not make an executive available for this story, citing a quiet period prior to releasing earnings this week. But in an October BusinessWeek story, chief financial officer David Frear said the company is “very confident” it would meet its debt obligations in 2009.
When the merger between Sirius and XM was approved in July by federal regulators, the hope was that a single satellite company could thrive. But to close the deal, they took on additional debt at a high cost, Goss said.
The company’s hope is that a new generation of products, prices and services can boost slowing sales. Sirius XM expects to have 19.1 million subscribers by the end of this year and has estimated it will have 20.6 million by the end of 2009.
