After Merger, Sirius XM Shares Falling Sharply

Radio Firm's Stock Reached 52-Week Low of 68 Cents

After winning a long and tough battle for regulatory approval for its formation, Sirius XM Radio has been more recently faced with another fight: to keep its sinking stock from collapse.

Shares have fallen 29 percent this month, closing yesterday at 94 cents, as weak revenue and earnings forecasts coupled with the company's hefty debt load have rattled investors. The stock hit a 52-week low of 68 cents in trading on Tuesday.

In the first time he has given guidance since the merger between New York-based Sirius and District-based XM satellite radio providers was approved in July, chief executive Mel Karmazin told investors and analysts Sept. 9 that the company would lose about $350 million this year on revenue of about $2.4 billion and end up with 1 million more subscribers, for a total of 19.5 million. Karmazin's revenue predictions -- he said he expects $2.7 billion in 2009 -- were lower than analysts' estimates and would mean slower growth in revenue and subscribers than in previous years.

Compounding problems for the nation's sole satellite radio operator, New York-based Sirius XM faces $1.1 billion in debts that will be due in 2009. In February, $300 million of those debts come due. Karmazin said that he is talking to banks to refinance that debt.

Karmazin, a notoriously outspoken media executive and former head of Viacom and CBS, warned that finding money during the current credit crisis would be tough. He joked that he hoped not to have to personally lend Sirius XM money.

"I hope we don't get to that," he said at the conference hosted by Merrill Lynch.

Even a couple of weeks ago, the debt picture at Sirius XM didn't raise the level of concern that it has in recent days. Investors are questioning how the company will obtain financing as storied Wall Street firms like Lehman Brothers collapse.

"The last few days on Wall Street has really drilled home the fact that the credit crunch is not abating and, if anything, it is exacerbating, and that creates a lot of concern," said Tuna Amobi, an analyst at Standard & Poor's.

Amobi, however, has recently reiterated his view that shares of Sirius XM should be bought at this price. He said at levels below $1, Sirius XM's stock has become a value buy.

Analyst April Horace of Janco Securities rates the stock as a "cautious buy" at current levels. She also pointed to Sirius XM's debt load.

"Every bank you thought you could get money out of is either closing its doors or being sold," Horace said.

But, Horace said more details need to emerge on the company's growth prospects before she changes her view on the stock.