Sirius XM Holdings Inc (SIRI)

[LonJandis]

In contrast to my view, here is a gloom and doom outlook on the situation (tons of exaggeration in this article IMO):

Liberty Could Destroy Sirius Stock Value

http://seekingalpha.com/article/636261-liberty-could-destroy-sirius-stock-value?source=email_rt_article_readmore&ifp=0

By Dan Jennings

The news for Sirius XM (SIRI) stockholders just seems to get worse and worse. A takeover of the satellite radio company by Liberty Media (LMCA) could actually destroy what little value Sirius stock has left.

Liberty, which is controlled by Colorado billionaire John Malone, could use a legal mechanism called a Reverse Morris Trust to take control of Sirius, Barclays Capital analyst James Ratcliffe told the Street. A Reverse Morris Trust is a tax dodge in which a company creates a smaller publicly-traded company to control another potentially money losing company.

This would be bad for Sirius stockholders because Liberty could create a new IPO to issue more shares in the company if it implemented a Reverse Morris. Such a maneuver could create a lot of watered-down Sirius stock. It would be good for Mr. Malone because he could control Sirius on the cheap. Under a Reverse Morris, he only has to own 50% of the stock to control the company.

This kind of deal is highly likely given Sirius's potential liabilities, the biggest of which is the $330 million lawsuit that Howard Stern and his agent have filed against the company. The suit has been dismissed by a New York judge, but Stern is appealing.

The reason for the suit was that Sirius refused to give Stern millions in stock options he was promised when he took his talk circus to satellite radio. Sirius later reneged on the deal by claiming that its original contract with the shock jock was abrogated when it merged with XM. Malone might try to pay Stern off with shares in the Reverse Morris, which might be cheaper than a court battle.

That could send Sirius stock falling even lower because Stern would presumably sell off those options on the market. Stern and his co-plaintiff and agent, Don Buchwald, would be able to take home a nice chunk of change. Mr. Malone would be able to keep a valuable entertainment asset happy and get a tax write-off while settling a potentially costly lawsuit that could generate a lot of negative publicity. Everybody would be happy but Sirius stockholders, who would once more get the shaft.

Sirius Expanding Reach in U.S. Car Market

The interesting thing about Sirius is that it is doing a great job of expanding its market share even as its stock value sinks. One market Sirius is going after aggressively is used car buyers.

Around 1,200 Ford (F) and Lincoln dealers have signed on to offer free Sirius XM in all of their used cars. That will give Sirius tens of thousands of potential new subscribers. Even if it just 10% of those used car buyers sign on with Sirius, it will be a huge boost to the company's profits. It could also mean a long -term boost to the company's earnings per share if it ever recovers from this takeover battle.

This means that at least one of Sirius's initiatives, its Used Car Program, is working, so. So this stock displays a lot of potential for future earnings.

Advertising Agencies ignoring Pandora despite Claims of Popularity

Streaming music service Pandora (P) is now the most popular radio network for American listeners between ages 18 and 49, data from ratings firm Triton Digital indicates. Yet despite this popularity, advertising agencies are still skeptical of digital radio and refusing to buy advertising on Pandora.

Trade journal Ad Age surveyed media buyers for advertising agencies and found them extremely skeptical of Pandora and its claims of large numbers of listeners. The big reason why Madison Avenue is so skeptical of Pandora is that its ratings are not measured by the most respected radio-ratings service, Arbitron. Instead, Pandora has to make do with less -trusted ratings agencies like Triton Digital.

Madison Avenue's skepticism of Pandora is reflected over on Wall Street - the company's stock values fell by 10% in trading after Memorial Day. It should be noted that the real cause of Pandora's fall could be investor weariness driven by all the negative media coverage of the Facebook (FB) IPO debacle.

Pandora actually has a lot going for it, and it should be going up on the news about advertising. Pandora stock should shoot up dramatically if it could ever convince Arbitron to start counting its listeners. If that ever happens, expect increases in Pandora shares.

Pandora shares should go up in value when the media gets bored with Facebook and shifts its attention elsewhere. Once investors start evaluating Pandora as a completely separate company from Facebook, they may change their minds about it and start buying again. That means Pandora's shares could start going up once the dust from the Facebook crash settles.

Samsung gets into Digital Music Business

Pandora, Spotify, Sirius, and Clear Channel (CCO), which owns and operates iHeartRadio.com, have some serious competition in the streaming music business. The giant Korean electronics Samsung (BC94 in London) has revamped its answer to iTunes, the Digital Music Hub.

The New York Times reported that the new Music Hub will offer subscribers 19 million songs for download and free storage in cloud lockers. Subscribers (presumably owners of Samsung devices such as smartphones and Galaxy tablets) will pay around $16 a month for the right to download any song or upload a personal library of songs to the cloud. So far, Music Hub is only available in Europe, but it should reach North America real soon.

This could be a huge challenge for Sirius, Spotify, and Pandora because Samsung's gadgets are extremely popular. It has taken nine million preorders for its Galaxy SII phone alone, and an estimated 40% of the devices using the Google (GOOG) Android operating system are made by Samsung, so. So Music Hub could conceivably take a lot of market share away from companies like Sirius and Pandora.

A successful roll out of Music Hub in the U.S. could hurt Pandora's earnings per share and stock value. The real danger to Pandora would be if Samsung or telecom companies such as Verizon started giving Music Hub subscriptions away with devices. That strategy has worked well for Sirius in the car industry. It is highly likely because Samsung definitely does not need the revenue from music subscriptions. It could use Music Hub as a loss leader to get consumers to buy its phones and tablets.

Election could Boost Revenues at Pandora, Sirius and Terrestrial Radio Operators

The upcoming election could boost revenues and increase earnings per share at Pandora and terrestrial radio operators such as Clear Channel, Cumulus (CMLS), and CBS Radio (CBS). The source of this extra revenue is obvious - both President Obama and likely Republican nominee Mitt Romney plan to spend incredible amounts of money on advertising this year. Both parties plan to lavish vast sums on Congressional elections as well.

Politico reported that Republican groups are planning to drop a $1 billion advertising bomb this year. The biggest political donors, the Koch brothers, reportedly plan to spend $400 million of their own money to buy ads for GOP candidates. Mitt Romney's Super Pac (Political Action Committee) Restoring America's future is trying to raise $100 million for advertising. This is on top of the $800 million that the Romney campaign and the Republican national committee are trying to raise for advertising. To add icing to the cake, the U.S. Chamber of Commerce is trying to raise $100 million for even more political advertising.

The Democrats are also doing their part too -- unions are planning to spend between $200 and $400 million on behalf of Democratic candidates. President Obama has his own super Pac Priorities USA, which is also planning to spend $100 million to counter Romney. As of May 21, the Democratic Party and liberal groups had raised around $462 million for advertising purchases for Congressional elections.

It's obvious that a large percentage of that money is going to radio, particularly talk radio. That would benefit Clear Channel, Cumulus, and CBS. Pandora could also benefit, because Obama needs to mobilize younger voters, who are presumably listening to digital radio, if he wants to win. Expect the Democrats to make some major ad buys on Pandora. Sirius could also benefit too because people listening in cars are a captive audience and, both parties are likely to target.

Election time ad buying could really help Pandora, which needs all the cash it can get. A few major political advertising buys could boost Pandora's stock value and earnings per share. Political advertising purchases could also help Sirius and Clear Channel's efforts to sell digital radio advertising.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.