Wednesday, September 06, 2006

Forbes Positive On Satellite Radio

Adviser Soapbox
Satellite Radio Set To Soar
Joan Lappin, Gramercy Capital Management 09.06.06, 3:00 PM ET (www.forbes.com)

Thus far, 2006 has been a particularly unhappy one for shareholders of both satellite radio competitors, but I expect that to change shortly. Both Sirius Satellite Radio and XM Satellite Radio peaked in December 2004: XMSR at just above $40 and Sirius at $9.43, just as it announced that Howard Stern would be leaving CBS to join Sirius a year later, in January 2006. By comparison, XMSR is now at about $12.50, and Sirius trades near $4.15. When the stocks were peaking, the industry had 4 million total subscribers. By December 2006 that number should exceed 14 million.

XM took a strong, early lead over Sirius in the number of subscribers it garnered. It had a strong alliance with General Motors, and its product worked properly sooner. XM made a deal with Major League Baseball to broadcast all of its games and offered extensive commercial free music programming. Its brand recognition was superior, and by the end of 2004 it had signed up 3.3 million customers, versus only 1.1 million for Sirius.

Sirius was raging out of control for years. It used its stock to do a deal, any deal, so it now has an outrageous 1.4 billion share base. It paid too much for everything it acquired: Howard Stern, National Football League games, even its former top management. Although it was first-to-concept for satellite radio, it picked the wrong suppliers and lost its early advantage because its system just didn’t work. Time healed that problem, but not before the early adopters bought XM units....read more: HERE

9/06/2006 10:01:00 PM

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