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New CEO to Expand Sirius Beyond Satellite Radio in Cars

*from, April 30, 2013 (To view original article click here.)

Take Away #1: The new CEO for satellite radio company Sirius XM Radio Inc. thinks radio is good business, but for the future, opportunities may lie with in-car services like automated safety.

Key Facts and Figures:

  • The company is investing in telematics, another name for automated security and safety services in cars, such as GM’s OnStar brand.
  • Sirius signed a deal with Nissan Motor Corp. in the fall and is looking for more agreements, said CEO Jim Meyer.
  • Meyer laid out his plans after he was appointed full-time CEO on Tuesday.
  • Meyer, served as interim CEO since December when he joined the company’s board.
  • Meyer was hired in 2004 and oversaw relationships with the auto industry, which accounts for the bulk of the company’s revenue.
  • Sirius will focus on offering entertainment and “infotainment” services such as weather and gas prices to drivers, in addition to telematics.
  • Services like “infotainment” and telematics, which includes stolen vehicle tracking and roadside assistance, tap Sirius XM’s existing satellites.

Take Away #2: Analysts said they liked the plan because it could help diversify Sirius’ revenue stream as it faces more competition in cars from streaming internet services such as Pandora.

Key Facts and Figures:

  • A Barclays research note estimated that the auto audio and infotainment area, which includes telematics, is a $15 billion a year industry.
  • Information controls, which includes displays in cars, is a $12 billion a year business.
  • ISI analyst Vijay Jayant said Sirius should invest in these new services because it will face challenges as more cars become equipped with Internet and drivers can choose other entertainment options.
  • “Eventually they will have to compete with more choices so you have to make yourself more valuable to the car guys and to consumers,” Jayant said.

Take Away #3: The specifics of some of the services Sirius wants to offer are not yet known but Meyer sees a long-term opportunity for them in the next five to 10 years.

Key Facts and Figures:

  • “It’s not going to happen in six months. This is going to take a while. We’re working hard about what role we can play and what (the car makers) would like us to do,” Meyer said.
  • Sirius XM plans to charge monthly fees for these new features that will be bundled with the satellite radio product.
  • Sirius is talking with automakers about what it can do in 2017 and 2018 car models, Meyer told investors on Tuesday’s conference call.
  • The company does not yet have a revenue target for this area, but when asked if it wants to acquire companies in the automated car services space, Meyer hinted that Sirius XM was in the market.
  • “The specifics of how we’re going to evolve down that path will take shape in the next six to 18 months,” said Meyers.

Take Away #4: While a lot of companies are trying to sell in-car systems, Sirius XM has an advantage.

Key Facts and Figures:

  • Meyer said Sirius has an advantage as it has been working with automakers for decades installing satellite radios on the assembly line.
  • The Barclays research note points to a number of companies operating in this infotainment space including Harman, Delphi, and Continental.

Take Away #5: Liberty Media, which controls the satellite radio company, picked Meyer after searching for a new CEO since December.

Key Facts and Figures:

  • Liberty, controlled by billionaire John Malone, is known for engineering complicated financial structures to minimize taxes.
  • Sirius XM said on Tuesday it was creating a holding company that will give it more financial flexibility to borrow money.
  • Sirius said it is under-leveraged and is aiming to raise its leverage target to 3.5 times EBITA from a current 2.5 times ratio.

Take Away #6: Sirius XM added 304,000 net subscribers in the quarter and plans to add 1.6 million net subscribers this year.

Key Facts and Figures:

  • The New York based company said total revenue rose 12% to $897.4 million, missing estimates of $905.6 million, according to Thomson Reuters I/B/E/S.
  • Net income rose to $123.6 million, or 2 cents per share, in the first quarter, compared with $107.7 million, or 2 cents per share, a year earlier, which matched estimates.
  • “Sirius XM bought back $494 million in stock in the quarter.
  • It also raised its 2013 annual free cash flow forecast to $915 million.
  • Sirius XM shares rose 4.2% to $3.19 on Tuesday.

*To view original article from click here.

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