Wednesday, May 31, 2006

What De-Coupling Means to Satellite Radio

May 31, 2006

Those that have followed satellite Radio for any length of time know very well that Sirius and XM have traditionally traded in very similar patterns. As the companies grew, good news from either satellite radio provider shined nicely on the other company as well. The same became true for bad news.

Traders could take advantage of this process, and catch dips and peaks with the confidence that the news for either company seemed to have a virtual duplicate impact on the other. The fact that these companies exist in a virtual duopoly helped to make satellite radio a sector play rather than a simple investment into a single equity.

Recent events have potentially caused a separation in the trading behavior of these stocks.....At least to a certain extent.

Those that actively trade Sirius and XM may bell well served to keep their eyes on the individual companies now more than ever. While there are aspects in the news that impact both companies, there are also events that are company specific.

As the catalysts that move these stocks switch from impressive subscriber metrics to impressive financial metrics, the separation should become more pronounced and clear. To a certain extent, this is the first time where choosing a horse to ride with is more important than simply being in the race. Many people, myself included, hold positions in both companies. Now more than ever, consideration as to where you as an investor will be placing your bets seems to matter more.

The coming months will be very interesting for satellite radio. Investors should look at and consider several factors involving these equities in making an investment decision. Is the sector right for you? If so, which equity seems to offer the best scenario to meet your goals? Do a lot of research, and work up your conclusions. It is your money, so become as aware as you can.

5/31/2006 11:45:00 AM

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