Wednesday, February 28, 2007

Cowen Believes Sirius & XM Are On The Cusp of Cash Flow Boom

Analyst: XM, Sirius Set For Cash Flow Boom
Matthew Kirdahy, 02.28.07, 1:09 PM ET, www.forbes.com

A Cowen & Co. equities analyst believes shares of the XM Satellite Radio and Sirius Satellite Radio are on the cusp of breaking loose.
In a note to investors Wednesday, Cowen analyst Tom Watts said both stocks will post gains in the second half of the year.
"They are just on the verge of demonstrating exceptional operating leverage and cash flow generation," he wrote. "The merger approval process, which we expect to result in approval, will cloud the picture, but we expect both stocks to appreciate in the second half."
XM Satellite Radio and its lone rival Sirius Satellite Radio agreed on a merger of equals Feb. 19.
Under the terms of the agreement, XM shareholders will receive 4.6 shares of Sirius stock for each share of XM they own. XM and Sirius shareholders will each own approximately 50% of the combined company.
XM would be bringing more than 7 million subscribers to the table, while Sirius carries more than 6 million. (See: "Subscriber Boost Narrows XM Loss" ).
The deal is valued at $13 billion and is in limbo pending the necessary government approvals. (See: "Sirius, XM Want To Make Music Together.") The House Antitrust Task Force is currently holding a public hearing examining the proposed merger.
"The strongest argument to approve the merger would be that one of the players would fail if not approved," Watts said. "High spending and continued losses by XM will hlep paint that picture."...read more: here

2/28/2007 01:36:00 PM

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