Tuesday, September 19, 2006

Slowing Growth? Not If You Look At The Big Picture

September 19, 2006

With so many reports and articles written about satellite radio, it is important for investors to digest the information, but also to keep their eyes on the BIG PICTURE.

It seems that each passing month there are reports indicating a weakness at retail in satellite radio, and those reports seem to generate some overall uneasiness about these equities (SIRI and XMSR).

What we really have here is a natural course of events coupled with a narrow view of the sector.

For whatever reason, many of these reports that indicate weakness at retail fail to mention or even consider the ramp up that is happening in the OEM segment of satellite radio. How is it that this rapidly growing component of satellite radio is virtually ignored?

Satellite radio generates subscribers from two primary avenues……RETAIL and OEM.

Now is it a reach to understand that if I bought a new car tomorrow, and it was equipped with satellite radio, that my “need” to buy a radio at retail is diminished?

The key here is that satellite radio has not lost subscribers. They are simply coming in greater numbers from the OEM channel, and thus taking away from the retail channel. This does not even consider that so far this year, the retail channel is still above last years pace. In fact, according to NPD, sales this year at retail are 23% above last year.

One only has to look at the subscriber numbers to see this bear out. Through Q2 of 2005 satellite radio had generated 1,859,774 subscribers. This year through Q2 satellite radio has generated 2,328,729 subscribers. That represents nearly a 500,000 subscriber gain over last year. This has happened with Ford just starting to ramp up, and other manufactures getting ready to come on line in the next 6 months to a year.

Those that look at the bigger picture understand and see that satellite radio is still growing nicely.

The basic and simple point here is that retail is ABOVE last years pace, while at the same time OEM’s are as well. Understanding that every OEM install depletes a potential retail sale underscores this example that satellite radio is still very healthy and growing.

This overview looks at the sector as a whole. One can, if the desire, break down the numbers for individual equities within the sector as well.

Remember.......Take in as much information as you can, but always be sure to look at the BIG PICTURE.

9/19/2006 11:26:00 PM

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