Liberty will likely follow the same script that it used in its pursuit of Sirius XM Radio Inc (NASDAQ:SIRI). After purchasing a major stake in the satellite radio operator, Liberty slowly acquired additional shares and exerted an increasing amount of control in the board room. While Sirius has been the beneficiary of a surging new vehicle market, its management also made some smart decisions, including the acquisition of talent and the merger with XM Radio in 2008.
In 2012, Sirius XM Radio Inc (NASDAQ:SIRI) enjoyed strong results and continued to leverage its relationship with the leading global automakers, ending the year with almost 24 million subscribers. For the period, the company generated increases in revenues and adjusted operating income of 12.8% and 20.6%, respectively, compared to the prior year. Sirius XM Radio Inc (NASDAQ:SIRI) benefited from a strong increase in new vehicle sales in the U.S., as well a bigger focus on the used vehicle market. In addition, the company achieved a higher operating margin due to its ability to spread its large fixed operating costs across a growing user base. Looking ahead, Sirius XM Radio Inc (NASDAQ:SIRI) expects growth in 2013 as the auto market continues to expand and the company uses its website to expand its services beyond the core auto segment.
Given John Malone’s investment track record, his moves are always worth a detailed review. While cable companies are losing video subscribers to newer platforms, like Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) Prime, they are gaining subscribers in the areas of internet and telephone service. However, their economic moats have been reduced due to technological advances, which mean that they will likely need to use less debt in the future. Charter is an interesting developing story, but Liberty provides better diversification through its controlling stakes in an assortment of diverse media businesses. Plus, investors get Malone and company’s management and capital allocation skills at a discounted price. Liberty is one to hold for the long term.
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