Tuesday, February 17, 2009

Liberty Beats Out Echostar for Sirius

The famous line in The Godfather, "It's not personal, just business" may not apply here. Clearly Sirius did not want to be ruled under Echostar and John Malone clearly wants to beat Charlie Ergan. And so, " Liberty Media Corp. will invest $530 million in financially struggling satellite radio company Sirius XM Radio Inc., the companies said Tuesday." As a shareholder of both companies, I am thrilled that my Sirius stock isn't completely worthless, although at pennies per share, it's not worth what I bought it at. As a Liberty shareholder, I'm not sure it's a good deal either.

Sirius faces too many challenges, a bad economy, a dropping auto industry, heavy competition from free radio, the web, and now iPhones and other cellular devices. Is there enough exclusive content to deserve a subscription or does the pricing policy need to be revisited.

And what happens when the next debt payment is due. Will Liberty still be there to drop more good money after bad. Are there synergies for Liberty to make the sum of the two companies more valuable than its individual parts. Liberty may have won the contest but was it only a booby prize.