it's NOT debt laden due to the convertible nature of most of the debt, and it's certainly not junk.
I do believe the senior notes are rated Junk??? No???
I bought into the stock when it crashed in the fall because I felt it was clear the co would get the financing from GM and others.
No actually what you had was GM converting "long term"payables into debt instruments. So in event of a BK. Their "long term payables" which would be lost in a formal reorg, were converted to debt. As James Garner once said... "It's an old Arizona trick, but I have seen it used as far north as Montana." Qualcomm did the same thing with Globalstar.. Moved millions in AP's to Vendor Debt... You know they are in trouble when your vendors start converting unsecured paybales into debt instruments. If the can pick up some warrants in the process.. Even better.
It's true that sub aquisition costs are high but they're trending down, and as volumes ramp, they'll decrease at a more rapid pace,eventually to zero
Yeap!! Everyone always say this about "subscriber models".. The problem here is ARPU. $10 bucks a month in ARPU will support a CPGA of about $40.
Right now.. I calculate CPGA to be in excess of $250. At 14% cost of capital. Your CPGA costs you $35 a year in "interest expense", not even to begin talking about recapturing your CPGA.. At current CPGA levels.. Recapture is measured in YEARS.. versus months in other subscriber models like WSP's.
So it's not really a matter of how many subscribers you get.. It's how much you lose with every sucscriber, and your cost of capital to fund the CPGA.
All you end up with is articles like this...
"XM Satellite Loss Grows but Revenue, Subscriber Base Soar"
XM Satellite Radio Holdings Inc. said its fourth-quarter net loss widened, but revenue soared thanks to rapid growth in the number of subscriber . The satellite-radio provider Thursday reported a net loss of $155.9 million, or $1.76 a share, compared with a net loss of $144 million, or $2.26 a share, a year earlier. Total revenue soared to $9 million from $532,000.
Yeah! I know, I know.. they are just getting started!!! Same story heard over and over again in the Subscriber Model business. Who cares if you lose money on each one.. We'll make it up in volume!! Where have I heard that one before?
I owned QCOM from Sep 98 to JAn 2000. I've seen and felt this kind of action before and IMO it's just darned foolish shorting this thing at this stage.
Yeap! Me Too!! I
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Sold just after the split.. Highest I got was 179 and change
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Then I shorted it in the 140 range.
But, this feels nothing like Qualcomm.. Qualcomm was selling at 1X revenue back in 1998. Had no debt to speak of, and was making money.
Lots of folks told me the same thing about shorting Globalstar!!
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It all comes down to the math!
I was shorting these SDAR companies before people knew what they were!
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I've got a couple of WSP's sitting on the edge of Bankruptcy with better business cases than these things.
Just don't take it as a shock when they announce the completion of the SPOT.
And so it goes
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