Monday, August 21, 2006

Thanks For Your Input; Here Are Some Readers' Comments

Readers, thanks so much for your responses to my post on August 17th: "SSG Is Interested In Your (Sirius) Thoughts..." Link: HERE

Despite a spate of positive news (*), Sirius is touching 52 week lows. What’s bugging investor perception? If you want to share your (legitimate) thoughts with our readers, please e-mail me at ssgfive@yahoo.com(*) Here are some of the most recent positives:1. FM modulator issues with FCC mostly resolved. Targeted hardware back in production, inventory restocking at retailers2. Sirius suppliers doing well. Directed Electronics, DEIX, stock price up 31% since raising 2006 guidance, resumption of manufacturing of Sirius hardware, confirming progress with FCC on FM modulator issue3. Ford (F) stock up 36% since restructuring announcements; Ford will have greater financial flexibility and will introduce new products to ramp up sales4. Radio Shack (RSH) stock up 33% from 52 week lows, on expectations of restructuring and rebranding5. Confirmation of long awaited availability of Sirius wearable/portable device, the Stiletto, by end of summer, indicating at least partial resolution of RIAA issue6. Successful resolution of CBS-Stern lawsuit, including rights to Stern “classic” tapes. Promotional opportunities anticipated to counter XMSR’s "Oprah" push in September7. NFL season commencing, providing ancillary promotional opportunities into holiday season8. NASCAR jumps to Sirius in January 2007. Apparently, this audience is massive and loyal. NASCAR brand bolstered by hugely successful film "Telladega Nights". More promotional opportunities for Sirius for upcoming holiday season9. Q2 earnings did not disappoint, management met or exceeded expectations, raised subscriber guidance from 6.2 to 6.3 million for 2006, reiterated CFBE by 2007, possibly Q4 200610. Competitor XMSR up 20% from 52 week low. Despite differences, usually the two companies trade in tandem11. Even Cramer has restrained his negative comments recently (previous position: sell, sell sell or don’t buy, don’t buy, don’t buy!)12. Recent confirmation of long anticipated (and previously delayed) rear seat video to be launched in 2006So what’s bugging the stock? If you have any thoughts or insights you would like to share, please forward them to me at ssgfive@yahoo.com

Here are some of the comments I received:

1. Satellite radio is not "cool" anymore, ie, the sector is out of favor with momentum players

2. Sirius has a high market cap relative to XMSR

3. The market fears potential share dilution (even though management has reiterated several times that they have a fully funded business plan)

4. Since XM mentioned that they are experiencing softness in retail, investors are expecting Sirus to lower guidance (even though they raised it on their Q2 conference call)

5. Pressure from terrestrial radio. It seems like the terrestrial radio has "friends in high places" and will do anything to bring down satellite radio radio rather than compete. Terrestrial is used to playing dirty...just look at their involvement in the "payola" scandals.

6. Perhaps Wall Street does not believes that Sirius will be cash flow positive by the Q4 2006 or 2007. Many "experts" don't expect CFBE until 2011.

7. Media is calling for a merger, so possibly paired trading (short SIRI, long XMSR).

8. FCC issues and perception of scant hardware availability; fears that modifications to radios will result in slower sales, and poor reception leading to higher product returns and churn

9. Naked short selling and manipulation by hedge funds

10. Hedge funds who bought Sirius convertible bonds hedging by shorting the stock.

11. Fear that "Stiletto" launch will be delayed like the S50, even though management has reiterated a Summer 2006 release

12. Concerns about cash ; Sirius burning too much cash.

8/21/2006 01:18:00 PM

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