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Sunday, November 23, 2008

In financial difficulty - for good reason

In May 2006, I bought a new car. Since I own a small boat and tow it to various sailing events, I wanted the version with the larger engine. Needless to say, when ordering for stock, dealers only specify that engine in combination with every imaginable option and accessory.

Included in the price, among many other things for which I had very little need or desire, was a satellite radio receiver and a one year subscription to Sirius Satellite Radio. Out of curiosity, and because I had already paid for it, I activated the service.

In April 2007, I received a call from Sirius. The representative asked me if I wished to continue receiving its service. I responded that it was quite nice to have but not worth paying money for. The conversation ended - pleasantly enough - on that note.

Sirius, in spite of having merged with XM Radio, its only competitor, continues to exist but suffers many financial difficulties. Two reasons come to mind: the first is overpaying for talent - including $500 million in cash and stock to obtain the dubious services of shock-jock Howard Stern. The second is sheer incompetence as evidenced by the fact that, in spite of my refusal to pay to receive its signal, I was not cut off until October 2008 - seventeen months after my subscription expired.

This episode simply provides additional support for the hypothesis that, were the competition not as incompetent - or worse, there are few reasons for any given company to avoid bankruptcy. Having merged with its only direct competitor, that may be where Sirius is headed and, with its shares trading at 14 cents, the stock market is certainly predicting an early demise.

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