Thursday, May 25, 2006

Jacoby - Is He Rational?

May 25, 2006

This is not something that Satellite Standard Group would normally write, but after seeing what Jacoby has done over the years, we felt that his actions deserved a response.

It is no secret that Banc of Americas analyst Jonathan Jacoby is a fan of XM Satellite Radio. It is also no secret that Banc of America has substantial capital invested in XM (they also have invested in SIRI, but to a much lesser extent).

Jacoby has been very persistent in his outlook for XM, and at times seems to take "pot shots" at Sirius in his reports. Investors in Sirius have always noted that as things began to climb, you could count on Jacoby to issue something to stem the rise of Sirius.

Earlier this year there were those that heralded Jacoby's call on Sirius at $4.50. What those investors forgot was that Jacoby has always tied his Sirius target of $4.50 to an XM price of $30. We are all well aware that XM is not at $30.

Jacoby still seems to feel that "relative valuation" is the main component of Sirius, and remains his reason for a neutral rating on Sirius, and a buy rating on XM. It would appear that Jacoby feels that Sirius is properly valued at current levels.

Jacoby is quoted as saying to investors today that, he has, "become more positive on Sirius given its absolute valuation vs. our $5 price target, but we're maintaining our "Neutral" rating due to an expensive relative valuation and our belief is that management needs to demonstrate more rational competitive behavior."

WHAT DID HE SAY????? Sirius management needs to demonstrate more rational competitive behavior?????

Did Jacoby miss which satellite radio company spent large amounts of money in Q4 2005 and again in Q1 2006?

Does Jacoby feel that a PR by XM citing that the entire sector is weak is rational competitive behavior?

Does Jacoby feel that XM's comments in light of the Volkswagen/Audi deal were rational competitive behavior?

Does Jacoby feel that consumer complaints against XM to the point of an FTC investigation are rational competitive behavior?

Has Jacoby missed the litigation filed by 14 law firms charging that XM overspent?

Did Jacoby miss the resignation of Board Member Roberts, and his reasons for leaving?

It was only a few weeks ago that Jacoby was touting that XM had an advantage because of the WCS spectrum. Interestingly, he nas not mentioned it lately. Most other analysts were trying to obtain information from XM regarding the spectrum so that they could work on their projections. Meanwhile, Jacoby called the spectrum a good thing for XM without understanding the build-out costs. Now, XM no longer has the spectrum, and has lowered guidance, and Jacoby still feels that XM is a better buy, and that XM should be at $25.00 when Sirius is at $5.00.

SSG feels that both Sirius and XM are undervalued. We feel that both companies are oversold. We feel that both companies can do well. We feel that Jacoby needs to look at things a little deeper, and look at what becoming Cash Flow Break Even first means to Sirius.

In the opinion of SSG the IRRATIONAL COMPETITIVE BEHAVIOR is being exhibited by Banc of Americas Jonathan Jacoby, who doesn't waste any chance to take a shot at Sirius.

5/25/2006 04:10:00 PM

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