BOA's Jacoby Weighs In
April 23, 2007 Jonathan Jacoby published a 1Q Preview note lowering price targets, highlights below: Satellite Radio 1Q07 PreviewKey Inputs Point to Lower Fair Value for Both XMSR and SIRI Despite the recent sharp decline in share prices, we maintain our neutral ratings on XMSR and SIRI – standalone values and merger synergy values likely are lower than previously estimated. Given the proposed merger, the fair value of XMSR and SIRI consists of fair value as a standalone entity plus the expected value of merger synergies. In our view, BOTH components are worth less than we had previously estimated. 1) Lowering our stand-alone estimates due to lower longer-term conversion rate assumptions. New standalone value estimates are $2.25 (from $2.50) for SIRI and $10.50 (from $13.50) for XMSR. We have scrubbed our valuation models for both companies. The principal adjustment was to reduce our longer-term OEM conversion rate estimates for XM to make them more consistent with our longer- term assumptions for Sirius (i.e., 40-45%). Our previous model assumed that conversion rates bottomed at 50% in 2H07. The adjustment to OEM churn shaves ~500K subscribers off of our 2010 year-end estimate. 2) Lowering our merger synergy assumption to $3.6B from $5B – sports rights fees could increase initially under the base scenario. Our prior analysis assumed that combined programming and content expenses would be reduced by 15% in ’08 and by 25% in ’10 and thereafter. However, in order to be able to offer baseball or football to subscribers of both satellite networks, the merged entity might need to increase the current payments and/or extend the agreements. Our model now assumes that there are no net programming cost savings as lower costs for certain programming (e.g., music and talk channels) could be offset by higher sports rights fees. The current stock prices seem to suggest that the probability of regulatory approval of the merger is roughly 35-40% - but our FCC contacts believe that the percentage is trending lower. Assuming that our new fair value estimates for XMSR and SIRI with or without a merger are roughly correct, we estimate that the market implied probability of obtaining regulatory approval for the merger from the DOJ and FCC is between 25% and 40%. On a positive note, we see little downside risk to our 1Q07 (and 2007) subscriber estimates. In fact, we believe that XM should beat our net add estimate of 242K (consensus is 334K – we believed that 290K is reasonable). We expect Sirius to meet or beat our net add estimate of 461K (consensus is for net additions of 497K). XM and Sirius will report 1Q07 results on April 26th and May 1st, respectively. Our new price targets are $2.75 for SIRI and $12.50 for XMSR. Given a smaller synergy value estimate and lower standalone value estimate for each company, we estimate that SIRI would be worth ~$3.50 and that XMSR would be worth ~$15.50 if the merger is approved. Our new price targets are $2.75 for SIRI (from $3.50) and $12.50 for XMSR (from $17) – our new targets assume a 40% probability of the proposed merger receiving the necessary regulatory approvals. Sector View: Audience erosion will continue to cap top-line growth over the next decade, whether radio "goes Google" or not Labels: bank of america, jacoby, merger, q1 2007, sirius, xm 4/23/2007 10:04:00 AM
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Bear Stearns on XM Q1
 April 23, 2007 Peck notes on XM Satellite Radio: Looking Forward to 2H
Investment Thesis. Both satellite radio stocks have declined significantly since they announced the agreement to merge as the merger outcome remains uncertain and visibility on the merger process (especially at the more important DOJ level) remains limited and the retail environment remains challenging even as the OEMs are likely to pick up speed only towards 2H07 and going into 2008. While OEM will determine LT valuations, NT retail outlook remains tepid. As such, we think investor interest remains limited until there is more visibility into either the merger outcome or the YoY unit sales comps improve.
1Q07 Preview. We are tweaking our 1Q estimates given that the retail environment continues to remain challenged and the OEM contribution would become more meaningful in 2H.
Sub Adds. We are reducing gross sub adds from the retail channel to 387k, which implies a decline of 25% from the 516k levels in the year ago period, likely a reflection of the both the market environment that remains challenging as well as the fact that NASCAR transitioned to Sirius this year. From the OEM channels, we expect 569k gross adds, up about 15% YoY from the 491k level in 1Q06. In aggregate, we are projecting 957k gross adds during the quarter. We are reducing our estimate of net sub adds to 285k from 375k, which is in line with street consensus of 280-290k.
Financials. We are projecting total revenues of $264 mn, which remains virtually unchanged, and is in line with consensus. For Adjusted EBITDA, our estimate of $(27) mn is in line with consensus. On the call, we expect the company to discuss the accounting impact of merger related costs, on which XM had limited visibility when it had reported year-end 2006 results. Labels: bear stearns, q1 2007, xm 4/23/2007 09:50:00 AM
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Bear Stearns On Sirius
 April 23, 2007 Bob Peck of Bear Sterns published a preview note on Sirius: Sirius Satellite RadioLooking Forward to 2H; Street Growth Ests for 1Q Conservative Investment Thesis. Both satellite radio stocks have declined significantly since they announced the agreement to merge as the merger outcome remains uncertain and visibility on the merger process (especially at the more important DOJ level) remains limited and the retail environment remains challenging even as the OEMs are likely to pick up speed only towards 2H07 and going into 2008. While OEM will determine LT valuations, NT retail outlook remains tepid. As such, we think investor interest remains limited until there is more visibility into either the merger outcome or the YoY sales comps improve. 1Q07 Preview. Conf call scheduled for 5/1 at 8 ET at www.Sirius.com. We are tweaking our 1Q estimates marginally; key changes include the following: Gross Sub Adds. We are tweaking gross sub adds from the retail channel to 472k, down ~30%YoY from 659k in 1Q06, likely a reflection of the market environment that remains challenging for both the satellite radio operators, and tough YoY comps to the Howard Stern transition last year, although offset by the NASCAR transition to Sirius this year. Note, our similar YoY decline in gross adds from the retail channel for XM was 25%. From the OEM channels, we expect 501k gross adds, up about 65% YoY from the 302k level in 1Q06. In aggregate, we are projecting 973k gross adds during the quarter. Net Sub Adds HIGHER than Consensus. We are maintaining our net sub adds estimate of 546k, which is higher than street consensus of about 500k, based primarily on the expectation that the street has failed to incorporate the positive impact of the NASCAR transition. We are tweaking up churn to 2.3% from 2.2% previously, reflecting the one-year anniversary of Howard Stern, and higher potential churn from OEM. Financials. We are marginally reducing SAC est to $107, and CPGA to $141, as the company transitions to the next gen chipsets. We are projecting revenues and adjusted EBITDA of $220 mn and $(80) mn, respectively. Labels: bear stearns, q1 2007 4/23/2007 09:44:00 AM
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Wednesday, April 18, 2007 UBS XM Q1 Preview
April 18, 2007 Comments from UBS on Q1 for XMSR: XMSR 1Q07 Preview: Continued Sub Weakness Expected
Lucas Binder 212-713-4966 lucas.binder@ubs.com - XMSR reporting 1Q07 on April 26
XMSR will hold its 1Q07 conference call at 10:00 AM on April 26. We expect weak subscriber growth with net additions of 284k (down from our prior estimate of 343k) and down 50% y-y. Weak subscriber growth is driven by our estimated 8.5% decline in gross adds and an increase in churn to 2.7% up 40 bps y-y. We believe XM will continue to improve customer service to help lower churn. - EBITDA moving closer to break-even; still some ways to go. We expect 1Q07 revenue of $264.5M, up 27.2% y-y and 2.9% q-q. Our EBITDA loss estimate of $(30)M is a 38% y-y improvement and 57% q-q improvement. However, we do not expect XMSR to report its first positive EBITDA quarter until 1Q09, which is our breakeven EBITDA year. - Acquisition costs not expected to drop in 2007We believe XMSR must work to lower its acquisition costs. We expect SAC of $67 in 1Q07 and CPGA of $100, which are both up y-y. We would expect better economies of scale from XMSR as it improves its chipset technology. - Valuation: Maintain Neutral 2; Lowering target to $13.50 from $15.50. We base our price target on a detailed DCF analysis. Our assumptions include a 3% growth in perpetuity and a 13% WACC. We have lowered our target to $13.50 from $15.50 on a lower subscriber outlook. We expect SIRI to continue to gain market share from XMSR in 2007. Labels: q1 2007, ubs, xm 4/18/2007 04:10:00 PM
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Cowen Issues Q1 Preview Note
April 18, 2007 Cowen's Tom Watts issued a 1Q preview note today: Sirius Satellite Radio Reporting Date May 1, 2007 Key Issues - M&A Tenor Growing Negative. Since announcing a merger with XMSR on Feb 19, sentiment has grown noticeably negative for approval, unnecessarily pressuring both stocks. - High Operating Leverage Should Drive FCF Even w/o a Merger: Incremental margins for Pre-SAC Cash Flow were 42% for SIRI in 2006. We project increasing margins of 47% in 2008, and approaching mid-60s through 2012. We expect significant cash flow potential once SIRI turns cash positive in Q4:07, ahead of XMSR. - 2007 Guidance Low. We believe both XMSR and SIRI set sub guidance low for FY07, setting the stage for outperformance in H2 as subs ramp from new OEM programs and seasonality. - Gaining Market Share. We expect 526K Q1 net adds, down from 761K in Q1:06. This (31%) Y/Y reduction compares to (38%) for XMSR and represents cont.d market share gains vs. XMSR.s 355K. For FY07, we expect 2.1MM net adds vs. 1.5MM for XMSR. We expect market share to reverse in 2008 as XM.s larger OEM base ramps up installs. Valuation SIRI trades at $657 per 2007E sub and $527 per 2008E sub.. These values compare to XMSR.s $535 per 2007E sub, and $437 per 2008E sub . a 23% and 20% difference. Our DCF analysis implies 79% outperformance relative to the market over the next 12 months. Recommendation We maintain our Outperform rating on SIRI even without M&A potential with XMSR. We believe SIRI can outperform based on its FCF potential alone. Compared to XMSR, we prefer XMSR based on its stronger OEM relationships (60+% market share) and better relative value . 48% of industry enterprise value, vs. 52% for SIRI Labels: cowen, merger, q1 2007, sirius, xm 4/18/2007 09:54:00 AM
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Sirius Q1 2007 Conference Call Scheduled
April 10, 2007 SIRIUS Satellite Radio to Announce 1Q 2007 Financial and Operating Results on May 1
Company to Webcast Earnings Call for Investors and Media NEW YORK, April 10 /PRNewswire-FirstCall/ -- SIRIUS Satellite Radio (Nasdaq: SIRI - News) today announced that it plans to release 1Q 2007 financial and operating results on May 1, 2007. SIRIUS also plans to hold a conference call at 8:00 am ET to discuss these results. Investors and the press can listen to the conference call via the company's website, http://www.sirius.com, and on its satellite radio service by tuning to SIRIUS Channel 122. Source: SIRIUS Satellite Radio A replay of the call will be available on the company's website. Labels: conference call, q1 2007, sirius 4/10/2007 01:07:00 PM
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XM Schedules Q1 Call
April 9, 2007 Press Release Source: XM Satellite Radio XM Satellite Radio Schedules First Quarter 2007 Financial Results Conference Call for April 26WASHINGTON, April 9 /PRNewswire-FirstCall/ -- XM Satellite Radio (Nasdaq: XMSR - News) has scheduled a conference call for Thursday, April 26, 2007, at 10:00 AM ET to announce and discuss its first quarter 2007 financial results. Prior to the call, XM Radio's first quarter 2007 results will be posted to the Company's website at http://www.xmradio.com/ and released to PR Newswire and First Call. To listen to the conference call via telephone, please call one of the following numbers approximately 10 minutes prior to the planned start of the call. Call-in number: (877) 265-5808 Local call-in number: (706) 679-7931 Conference ID#: 5409333 The conference call can also be accessed through a live webcast on the Company's website at http://www.xmradio.com/ (click on "Investor Info" link at the bottom of the page). The webcast of the call will also be archived on the Company's Web site. If you are unable to participate in the scheduled call, a replay of the conference call will be available after 11:30 a.m. ET on Thursday, April 26, 2007 until July 26, 2007. Playback Numbers: (800) 642-1687 Local playback number: (706) 645-9291 Conference ID#: 5409333 Labels: conference call, q1 2007, xm 4/09/2007 09:11:00 PM
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