Will they never learn their lesson? In an article posted Friday afternoon, Scott Moritz of The Street Dot Com (TSCM) wrote an outright bash piece of Sirius XM (SIRI). I will refrain from posting a link to the article because it does not deserve the clicks. Here at Satwaves, Brandon Matthews has already posted many of the slam pieces that Mad Money “star” Jim Cramer has published. I was going to blow it off and let it be, but it really was just too much and needed to be responded to.

As we all know, Gary Parsons resigned yesterday as Chairman of the Board and was replaced by Mr. Eddy W. Hartenstein. For those that don’t know the history of Mr. Hartenstein, he has been a member of the Sirius board since 2005, and prior to this, served as a board member, President, and as CEO of DirectTV, Inc. (DTV) Curiously enough, Greg Maffei, CEO of Liberty Media (LINTA) and Sirius Board member  just mentioned that it should be announcing its new CEO sometime this week. Brandon has predicted that it might, in fact, be Gary Parsons that will be appointed.

Mr. Moritz starts out by insinuating that the reason that Mr. Parsons is leaving the company is because the company is no longer growing. He says, “You can’t blame Parsons, however, for wanting out. When you are a growth company and the growth stops, investors lose interest also.” He uses subscriber numbers as his proof that the growth has stopped. “As of September, Sirius’ subscriber rolls, which include unsold cars at auto dealerships, has dropped to 18.5 million, down from 19 million at the close of last year, and below the forecast the company provided a year ago.”

What Mr. Moritz fails to mention, is that while promotional subscriptions went down, Self Pay subscribers actually increased significantly year-over-year. At the end of September 2008, there were 15.1 million self paying subscribers. At the end of September 2009, there were 15.4 million, an INCREASE of 300,000 self paying subscribers. They also increased quarter-over-quarter by 35,405 from the second quarter of 2009. He did say “the close of last year” but Sirius did not report self pay subscribers for Q4 2008.

Mr. Moritz also states that “anyone would eventually tire of managing a company living off debt and the distant promise that cash flow will one day reverse to positive.” Apparently, Mr. Moritz hasn’t heard that “the distant promise” is coming in Q4 of 2009. Most analysts are predicting a PROFITABLE quarter for Sirius XM in Q4 of 2009. They are also expecting the company to generate full year Free Cash Flow (FCF) and over $400 Million in positive adjusted EBITDA. The company has also guided to 20% growth in EBITDA in 2010.  As far as debt goes, there are no significant maturities due until 2011. Now that Sirius is producing cash, paying off the majority of this debt or refinancing will not be an issue.

Jim Cramer recently sent an email to one blogger instructing him to delete his article that badmouthed TSCM and apologize. I guess they are lucky that Sirius XM is above that, or their inbox would be full.

So to you Scott Moritz, Jim Cramer, Fool.com (most of them), I leave you with the words of Jim Cramer’s email:

“If you really need to sell subs just sell them, don’t trash [Sirius XM] to do it.” jjcramer

David “Newman” Phillips
Disclosure: Long SIRI, no position any other security mentioned
Contact the author at newman@satwaves.com

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