Monday, June 05, 2006

Caris & Company Explores Sirius and XM Merger

June 5, 2006

Six months ago the mention of a merger between XM and Sirius would bring chucles and warnings that the government would never allow it to happen. Today, the story differs greatly, mostly because of the "beating" that Sirius and XM have taken over the past 6 months on the stock market.

Today, Susan Kalla of Caris & Company explores the possibilities relating to a merger between sirius and XM. To be clear, there has been no public annoncement made that this is being explored by the two equities concerned.

In her report Kalla states:

"As the battle royal between the two major satellite radio players continues, and performance falters especially for XMSR, we believe the boards of the two companies will explore options to preserve cash. One option is to merge XMSR and SIRI. A merger would reduce intra-sector rivalry and allow the merged satellite radio entity to compete with inter-sector rivals -- mobile phones, the internet, over-the-air broadcasting and recording
devices. A satellite-radio merger may face regulatory hurdles, but the Bush administration has demonstrated a willingness set aside antitrust issues; consider the Bells’ acquisitions of long distance players and wireless companies."

Kalla goes further to state that she feels the management at Sirius would be the better organization to lead the merged companies:

"Though Sirius reaffirmed its 2006 forecast of more than 6.2 million subscribers, investors sold anyway. In our opinion, SIRI is likely to report cash flow breakeven before XMSR. We view the management of SIRI, with a track record in the media business as better suited to run a merged satellite-radio company than the XMSR management."

Whether you would be a fan of a merger or not, it is easy to see the potential benefits that a merger would have. In would be the efficiency of staff and marketing spending. Gone would be the "exclusive deals" that come at a premium. In would be a simpler platform at the OEM level. Gone would be the cut throat pricing strategies. In would be plenty of bandwidth to offer new listening experiences. Gone would be the banter of those that follow these stocks with such passion.

6/05/2006 02:20:00 PM

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