DARS: Sirius explains all

By | November 20, 2001 | Feature

Sirius Satellite Radio has not enjoyed the best of press during the past few months. Some of the major anxieties addressed by a conference call last week included being late to market, losing its chief executive officer, admissions of glitches to its chip-set and the real fear that its funding cash was evaporating faster than a summer shower.

Sirius answered all the questions, and a few more besides. Senior staff said that Sirius’ launch date would be Feb. 14, 2002, in Houston, Denver and Phoenix, rolling out nationally in the U.S. during Q3/2002.

According to investment bank Bear Stearns, these cities were chosen for 4 reasons: 1) relatively large populations; 2) positive commuters characteristics; 3) high retail spending per city; and 4) geographic characteristics that benefit satellite radio reception. After the trial in these cities, Sirius expects to begin service regionally and then expand to a nationwide coverage during the third quarter of 2002. In terms of its distribution plans, Sirius plans to have its products available on commercial launch at approximately 200 retailers, including Circuit City, Best Buy, and Good Guys.

Management said that initial production of receivers utilizing the Agere chipset will begin shortly. Its radio manufacturers – Kenwood, Panasonic and Clarion – are expected to have units on retail shelves prior to the company’s commercial launch. In addition, management expects its manufacturers to be at full production in April of 2002, ensuring that supply is sufficient to meet anticipated demand. Bear Stearns, in a note, predicted net sales next year of 100,000 units (down from a previous prediction of 200,000) and 550,000 for 2003 (down from 700,000). Lehman Brothers was a little more bullish, predicting 2002 sales of some 150,000 subscribers, with the bulk (75,000) occurring in the important pre- Christmas 2002 quarter.

Sirius says it expects BMW to begin installing Sirius-ready units in the second half of 2002, which should position the company with a 2003 model year vehicle line. In addition to the BMW agreement, Sirius also signed an OEM distribution agreement with Porsche for the 2004 model year. A similar deal with Ford is expected to be announced soon.

Michael Ledford, senior vice president of engineering at Sirius, was adamant in squashing speculation about the health of the company’s satellites. Ledford stated that the satellites have not experienced any outages and are operating beyond specifications. As to funding, the company has some $392 million in cash, representing adequate funding to the end of next year.

Sirius also said they would launch with a higher bandwidth-per-channel than rival XM Satellite Radio, which might mean a discernibly better signal. Sirius will supply a minimum 60 commercial free channels, out of about 100 in total. Lehman Brothers said: “Sirius, which we believe has roughly a 10% bandwidth edge out of the gate (excluding more advanced compression), has less music channels proportionally and less absolute channels. The combination could mean that the bandwidth allotted per music channel could be twice that of XM’s, which could be audible in some environments.”

–Chris Forrester

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