Somewhere down the road XMSR and SIRI will merge. This will probably speed up this process.
Why would they "merge"? Assuming, arguendo, that they could get regulatory approval (highly unlikely), why would they do it?
Mergers and acquisitions, to be of value, have to produce some kind of synergistic effect. What would that be here? You have two companies with extremely expensive, incompatible satellite infrastructure and receivers, competing, precisely as the FCC planned. What, exactly, is the motivation for a merger? A few years from now both will be generating so much cash they don't know what to do with it all, and this is fairly obvious to everyone looking at the sector.
Why would there be a merger? And assuming there were going to be a merger, what is going to "Speed up the process"?
This individual claims to have resigned over differences in the company's direction. He says he didn't want to spend the cash to preserve XM's market leadership, preferring instead to get to cash flow breakeven earlier. The rest of the board said, "We want to take a longer view, sacrifice CFBE at the expense of making sure we maintain our market leadership position."
This appears to be a legitimate disagreement which warranted the guy's resignation. My view is that the board got it right -- they could have saved $100 million in Q4 and elected not to compete against Sirius/Stern, but they decided instead to work hard during that period. It paid off -- while Stern took away some market share, it was temporary and XM will return to something near its previous leadership position. |
