By Liana B. Baker
April 30 The new CEO of satellite radio company
Sirius XM Radio Inc thinks radio is a good business,
but for the future he said opportunities may lie with in-car
services like automated safety.
The company is investing in telematics, another name for
automated security and safety services in cars such as General
Motor's OnStar brand. It signed a deal with Nissan Motor Corp
in the fall and is looking for more agreements, CEO Jim
Meyer said in an interview.
Meyer laid out his plans after he was appointed full-time
CEO on Tuesday. Meyer, 58, served as interim CEO since December
when he joined the company's board. He was hired in 2004 and
oversaw relationships with the auto industry, which accounts for
the bulk of the company's revenue.
Sirius will focus on offering entertainment and
"infotainment" services such as weather and gas prices to
drivers, in addition to telematics, which includes stolen
vehicle tracking and roadside assistance. These services tap
Sirius XM's existing satellites.
Analysts said they liked the plan because it could help
diversify Sirius' revenue stream as it faces more competition in
cars from streaming Internet services such as Pandora.
Sirius XM shares rose 4.2 percent to $3.19 on Tuesday.
A Barclays research note estimated that the auto audio and
infotainment area, which includes telematics, is a $15 billion a
year industry while information controls, which includes
displays in cars, is a $12 billion a year business.
"It's not going to happen in six months. This is going to
take a while. We're working hard about what role we can play and
what (the car makers) would like us to do," Meyer said.
The specifics of some of the services Sirius wants to offer
are not yet known but Meyer sees a long-term opportunity for
them in the next five to 10 years. Sirius XM plans to charge
monthly fees for these new features that will be bundled with
the satellite radio product.
Sirius XM is talking with automakers about what it can do in
2017 and 2018 car models, Meyer told investors on Tuesday's
conference call that followed earnings.
Meyer said that while a lot of companies are trying to sell
in-car systems, Sirius XM has an advantage as it has been
working with automakers for a more than a decade installing
satellite radios on the assembly line. The Barclays research
note points to a number of companies operating in this
infotainment space including Harman, Delphi and Continental.
The company does not yet have a revenue target for this
area. When asked if it wants to acquire companies in the
automated car services space, Meyer hinted that Sirius XM was in
"The specific pieces of how we're going to evolve down that
path will take shape in the next six to 18 months," he said.
ISI analyst Vijay Jayant said Sirius should invest in these
new services because it will face challenges as more cars become
equipped with Internet and drivers can choose other
"Eventually they will have to compete with more choices so
you have to try to make yourself more valuable to the car guys
and to consumers," Jayant said.
NEW OWNERS, MORE DEBT
Liberty Media, which controls the satellite radio
company, picked Meyer after searching for a new CEO since
Liberty, controlled by billionaire chairman John Malone, is
known for engineering complicated financial structures to
minimize taxes. Sirius XM said on Tuesday it was creating a
holding company which will give it more financial flexibility to
Sirius said it is under-leveraged and is aiming to raise its
leverage target to 3.5 times EBITDA from a current 2.5 times
Sirius XM added 304,000 net subscribers in the quarter and
plans to add 1.6 million net subscribers this year. The New
York-based company said total revenue rose 12 percent to $897.4
million, missing estimates of $905.6 million, according to
Thomson Reuters I/B/E/S.
Net income rose to $123.6 million, or 2 cents per share, in
the first quarter, compared with $107.7 million, or 2 cents per
share, a year earlier, which matched estimates.
Sirius XM bought back $494 million in stock in the quarter.
It also raised its 2013 annual free cash flow forecast to $915