Friday, August 18, 2006

Jacoby on Sirius and XM

August 18, 2006

If nothing else he is consistent. Simply stated he favors XM and has for quite some time, but what is the reason for taking shots at Sirius in some way in every report?

Here is what Jacoby said yesterday in a report:

Report Excerpts:

".....Broadcast fundamentals remain weak - Remain selective - Buy Growth (UVN, XMSR) or Value (CCU, ETM)...."

We here at SSG feel that buying growth is a reasonable strategy, and that given the downturn XM had that there is a lot of potential for growth with this stock.....Provided they can clear the hurdles in front of them, and keep on that path.

"....Selectivity is the key. We recommend the following stocks: XMSR - Absolute valuation is depressed and it trades at a relative value discount....."

We feel that in relative terms that valuation is indeed depressed on XM, but there has been a strong series of events that have lead to that. Clarification on some of these events has happened, but there are still some clouds in the sky.

".......First look at the Sirius Stiletto. A description and picture of Sirius' new Stiletto was published in Crutchfields catalog. Features include a built-in antenna, plus a joint/supplemental antenna headset, 100 hours of storage, WIFI capability an two batteries (1 standard life 1 extended life). The MSRP is $399.99. Details should be posted on Crutchfields site on September 1st and the product will be available to ship in late September. Sirius has fully loaded the package, which is nice. The WIFI feature seems to be an interesting fix for indoor satellite reception issues, and the two battery packs may indicate that the stronger battery ads some bulk to the product....."

The description is pretty accurate, but it looks as if a compliment from him regarding Sirius is impossible if it is not coupled with some sort of negative slant or insinuation. In realistic terms the WIFI is a nice solution for indoor use, but it is not the entire solution. The battery pack comment seems to be confusing. The extended life battery is likely thicker than the standard life, but bulk is hardly the term to use here. The standard battery likely fits into a portion of the back of the radio. The radio is about 4" x 2" x 0.7" (5.6 cubic inches). The standard battery is likely 1.75" x 2" and fits into the "profile of the device. An extended batter is likely about .25 inches thicker. This would put part of the batter outside the rear profile of the unit, but only by .25 inches, and further it would not encompass the whole rear of the unit. This would mean that the "added bulk" is about 1.75 x 2.0 x 0.25, or 0.875 cubic inches. Reasonable deduction would place the unit at 6.475 cubic inches with an extended battery, and 5.6 cubic inches with a standard battery. By contrast, a Razor phone, which many are familiar with, measures 3.9" x 2.1" x 0.8" or 6.552 cubic inches. Would you consider a Razor Phone bulky????

"....Sirius is introducing 4 new products this fall. According to Orbitcast Sirius is set to introduce the Sportster 3 (a Sportster 4 without replay functionality) at an MSRP of $119.99 in September, the Starmate4 (an ultra slim version of the existing Starmate) at an MSRP of $119.99 in October, the Starmate3 (a Starmate4 without the replay functionality) at an MSRP of $99.99 in October, & the Stratus (the new low end receiver with added functionality compared to the existing Sirius One) at an MSRP of $59.99 in October. OUR VIEW - Unfortunately these products will be built to be FCC compliant and our concern is that with weaker modulators that churn could increase in 2007, as customers will be disappointed with the FM modulators in these devices (see reviews on the new Sportster4)"

Did he say that unfortunately the devices would be compliant????? How is it that this issue hits only Sirius, and not XM? Reasonable deduction will show that the newer FCC compliant radios will not have modulators as powerful as the past, but one needs to remember that these devices only really need to broadcast a few feet. As for Sportster 4 reviews.....Some people do complain about the modulator, but there are several solutions available, and these will be picked up on rather quickly by better sales people as well as satellite radio fans. For example, TSS RADIO includes a free "WIRED FM MODULATOR" with the purchase of a Sportster 4 (click the link). The FCC regulation is what it is. Surely Sirius as well as XM will work on better solutions, such as a more controlled directional antenna, but that will likely be a solution for the next generation of units. It is interesting that in his analysis Jacoby does not list FM modulation as a concern for XM, but he does for Sirius.

8/18/2006 12:10:00 PM

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