Wednesday, November 22, 2006
Forbes' Joan Lappin: Positive On SatRad
Adviser Soapbox, Forbes
Sirius And XM See Holiday GreenJoan E. Lappin, Gramercy Capital Management 11.21.06, 3:45 PM ET
This has been one tough year for investors in satellite radio, but the tide is turning. For the first time this year, XM Satellite Radio's quarterly conference call, on Nov. 6, contained no disappointments, so XM shares surged due to short covering. Sirius Satellite Radio has also traded higher in November. As a company, Sirius has performed very well all year, beating and raising estimates as 2006 has progressed, but its stock has been dragged lower by XM's problems. Now, the Christmas selling season holds the key to redemption for both companies.
XM has experienced unending turmoil this year. Two directors resigned, one with great fanfare in the first quarter, saying that he thought the company was heading off a cliff if it didn't mend its ways; another resigned in the third quarter, but in a less flashy way. XM has guided subscriber goals lower three times during the year, even as Sirius raised subscriber expectations ever so slightly. XM began the year expecting over 9 million subs by year's end. That number is now a much lower 7.7 to 7.9 million subs. Sirius started out predicting 6.1 million subs and now expects 6.3 million.
To solve its appearance of disarray, XM named Nate Davis chief operating officer on July 24. A very disciplined executive, Davis has clearly addressed XM's most pressing problems and imposed rigorous cost controls. Some analysts are starting to recommend XM's stock, or at least take it off their "sell" lists. XM remains the larger company in the satellite radio duopoly, but Sirius is rapidly catching up. ...read more:
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