Sirius/XM merger--what am I missing?

[Anderton]

So now Sirius and XM can merge, thanks to the Justice Department. But here's what I don't get: How does putting together two companies that lose money end up with one company that makes money?

 

Don't get me wrong, I love XM and hope it stays in business. But if Bob is in debt by $20,000, and Mary is in debt by $20,000, and they get married, aren't they in debt by $40,000?

 

[Frantag]

They also get to combine subscribers into one company. Two companies can't make enough to break even. One company with twice the subscribers might.

[Phil O'Keefe]

They also get to combine subscribers into one company. Two companies can't make enough to break even. One company with twice the subscribers might.

 

 

True, but usually the only way that works is if they divest themselves of redundant assets and reduce costs while keeping, or increasing the customer base. Usually that means laying off extra staff, selling extra property, equipment, etc.

 

It's kind of like when Bob and Mary get married, and instead of having to pay for two homes / residences, they start sharing one.

 

Since AFAIK, XM and Sirius will both remain operational after the merger, I'm not sure how that's going to work for them.

[slight-return]

True, but usually the only way that works is if they divest themselves of redundant assets and reduce costs while keeping, or increasing the customer base. Usually that means laying off extra staff, selling extra property, equipment, etc.

 

pretty much par for the course post-consolidation

 

Since AFAIK, XM and Sirius will both remain operational after the merger, I'm not sure how that's going to work for them.

 

It's the AFAIK part - they'll talk synergy and stuff...then WHACK -- both networks could remain operational for a time, that's tech staff - billing, sales/marketing, support, programming -- all the biz ops type stuff can get "happy sized" (they'll say "streamlined" so they can be "lean and mean") while maintaining the two broadcast systems

 

though the two systems could be transitional as well...some type of replacemnt equipment offer down the road (roll this into typical device upgrade cycling to reduce cost) to EOL one of the systems.

 

Crazy Anecdote : I used to work for a company that did stats analysis SW and dev services...when terminal stuff would come down the it was funny b/c we had the stats cannon we could aim at ourselves! So blowing smoke up the stats team's ass "oh, it'll be fine - don't worry" was kind of pointless (not that they didn't try)

[Frantag]

It's also possible they'll create a new revenue stream that allows streaming and downloading from anywhere.

[bp]

XM uses the birds for more of their signal, Sirius uses terrestrial repeaters to a higher degree. The terrestrial aspect of Sirius has been a grey area as far as FCC rules. Last time I checked, XM had four birds, Sirius two. How much this figures into the merger I have no clue.

 

WiMAX may cause them both problems in the coming years.

[blue2blue]

So now Sirius and XM can merge, thanks to the Justice Department. But here's what I don't get: How does putting together two companies that lose money end up with one company that makes money? Don't get me wrong, I love XM and hope it stays in business. But if Bob is in debt by $20,000, and Mary is in debt by $20,000, and they get married, aren't they in debt by $40,000?

 

It's multiplicative.

 

-20K * -20K = $400K

 

 

See?

 

You tech types. So logic bound.