Sunday, June 04, 2006

More Press for Satellite Radio in Sunday's New York Post

June 4, 2006

New York Post
June 4, 2006 --

After years of trading in near lock-step, the country's two giant satellite radio companies appear ready to put some space between them. Sirius Satellite Radio, lifted in large part by Howard Stern joining its ranks, has been hitting its subscriber-growth targets and doing everything right in the corner office, while rival XM Satellite Radio has been hit with a litany of negative issues.
At the same time, Sirius has been none to shy in pointing out to investors that those issues aren't affecting them.

During the month of May, Sirius' stock price declined only 5 percent to $4.41 while XM's dropped a more precipitous 21.5 percent to $14.69. "We seem to be at the inflection point where more and more attention is being paid to Sirius and XM as individual companies," said The Carmel Group's Jimmy Schaeffler. Of course, Sirius has helped nurture that view among investors by countering the bad news from XM with positive announcements.

Only hours after XM announced on May 24 a reduction in its 2006 subscriber guidance, to 8.5 million from 9 million, Sirius put out its own release reaffirming that it will hit its target of more than 6.2 million subscribers at the end of this year. Since then, Sirius' stock has gained 18.8 percent, or more than three times as much as XM's has. And where XM cited an overall softness at retail for its reduced subscriber outlook, Sirius made a point of throwing cold water on that rationale during a Sanford Bernstein conference last week. "Recently, there's been some noise in the market about softness in retail," said Sirius CFO David Frear. "We don't really see softness for us in retail. We see our market share up substantially."

To be sure, while XM holds a 60-40 market share lead in automobile installations, Sirius holds a 58-42 year-to-date retail market share advantage, according to research firm The NPD Group.
The recent differences between Sirius and XM extend beyond subscriber numbers and sales trends to include product launches, lawsuits and management credibility. On all of those fronts, Sirius has shown a better ability to eliminate or reduce both operational and non-operational distractions, according to Oppenheimer analyst Tom Eagan.

While Sirius plans to roll out its wearable satellite radio/MP3 device in the third quarter, for example, XM had to delay its similar Inno unit until this month. Once it hit the market, however, the Recording Industry Association of America slapped XM with a copyright infringement lawsuit that seeks $150,000 in damages for every song digitally recorded on the device. Where Sirius settled a similar lawsuit over its new S50 device by agreeing to pay a licensing fee for each unit sold, XM and the music industry have yet to reach an accord on the issue.

Less important from a financial perspective but more important to investor perception is the stock market moves of Sirius CEO Mel Karmazin and XM boss Hugh Panero. Last week Karmazin spent $4.5 million of his own money to acquire 1 million Sirius shares on the open market - the second time he's done that this year. By contrast, Panero has not bought any XM shares in the last 12 months. Indeed, in December, Panero sold 413,334 XM shares, or about 17 percent of his entire stake in the company. The 6.5 million Sirius shares owned by Karmazin triple the amount Panero holds in XM. That prompted Bear Stearns analyst Robert Peck to say in a recent report that [XM's] management credibility has been severely tarnished over the last six to nine months. "We think the market has lost faith, and unfortunately, what used to be XM's premium over Sirius (confidence in its management) has been eroded," adds Peck.
If the divergent path of Sirius stock continues, XM's share price premium may soon be eroded as well.


Link to article here

6/04/2006 07:24:00 AM

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