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Sirius XM for Clunkers

By Rick Aristotle Munarriz | More Articles
July 16, 2009 | Comments (10)

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Sirius XM Radio (Nasdaq: SIRI  ) investors can warm up to financial media, for a change.

BusinessWeek is shining kindly on the satellite-radio operator and other in-car gadgetry makers, including GPS giant Garmin (Nasdaq: GRMN  ) , in suggesting that recent favorable catalysts bode well for new-car sales.

Between details of the "Cash for Clunkers" program that will be revealed next week, and last week's successful bankruptcy exit by General Motors, consumers will be armed with the incentives and confidence to spring for a new set of wheels.

I admit, thought, that I don't see the argument for Garmin. Too many smartphones provide free rudimentary road-mapping, and that reality is only going to increase as network speeds improve. Not everyone has a smartphone, of course, but a good chunk of that market either will upgrade to a smartphone eventually or probably couldn't afford a Garmin or TomTom GPS system anyway.    

The case for Sirius is slightly more compelling. If GM fans are inspired to upgrade to new GM cars -- or if the "Cash for Clunkers" program inspires owners of older gas guzzlers to trade in their rides for more fuel-efficient cars -- we're talking about a whole lot of new cars moving off the showroom floors, with factory-installed Sirius or XM receivers aboard.

This is good news, but it's not necessarily great news.

  • Satellite radio has been around for years, so an ever-growing percentage of new-car buyers will simply be existing Sirius or XM subscribers.
  • Cost-conscious swappers who will trade up to a gas-sipping car may not be the ideal audience for pitching new premium audio subscription services.
  • Channel consolidation and select price increases have also turned off some potential buyers.

I still feel more confident about Sirius XM's long-term chances than I do about Garmin's, though. Yes, Garmin is the profitable one of the two. It also has a chunky dividend yield. Besides, smartphones will eat into Sirius XM's business, too, since media heavies CBS (NYSE: CBS  ) , Time Warner (NYSE: TWX  ) , and Yahoo! (Nasdaq: YHOO  ) all have free smartphone apps for Web radio.

However, Sirius XM's subscriber base should stabilize as the auto industry improves. Can anyone say the same for Garmin? That may be the key difference.

More news than static on Sirius XM:

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Garmin is a Motley Fool Global Gains recommendation. Try any of our Foolish newsletter services free for 30 days.

 Longtime Fool contributor Rick Munarriz subscribes to both XM and Sirius. He owns no shares in any of the companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Comments from our Foolish Readers

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  • Report this Comment On July 16, 2009, at 5:54 PM, kpinvest wrote:

    I still would not be jumping for joy, personally. Cars are coming equipped now with a wide array of options of media in the vehicles. Most of my friends who have (or had) XM installed, now just listen to music from their iPods.

    If consumers do decide that now is a good time to buy a new vehicle, which I think is still rather unlikely (who wants to spend significant amount of money on an auto when you're still reeling from a recession?), would they also agree to a two year agreement with a monthly charge for satellite radio? Or will they just settle for an iPod?

  • Report this Comment On July 16, 2009, at 6:14 PM, gilly031 wrote:

    the old ipod arguement. does your ipod have foxnews, cnn, comedy channels, or most live sports play by play?

    how good is th ipod after hearing the same old music 16 times. woudnt be fun to check out regae, live blues, or the playboy channel every once in awhile?

    live radio with commercial free music blows the ipod arguement away. ipod is great while exercising and such but for driving in the car sirius is the by far the best...

  • Report this Comment On July 16, 2009, at 6:21 PM, beatnik11 wrote:

    Gilly, I pods can have podcasts of many shows whatever their taste and may also listen to audiobooks. MP3s are mind bogglingly easy to obtain no matter what style you are looking for. Why pay a subscription when you can have an ipod or iphone with a sizeable HD you can have hours and hours worth of listening pleasure and one can easily put on new content.

  • Report this Comment On July 16, 2009, at 10:26 PM, DiscoFinance wrote:

    See the movie about Sirius XM and shock market chicanery "STOCK SHOCK" (The short selling of the American dream). Amazon has it.

  • Report this Comment On July 17, 2009, at 12:59 AM, foolishdoog wrote:

    I do not necessarily like to listen to my Ipod in the car. its a hassle and a distraction always changing the song to something i want to listen to. I like all the satellite channels because they offer more variety than my Ipod can deliver. In addition, i love POTUS.

  • Report this Comment On July 17, 2009, at 2:39 AM, jimwhenry1707 wrote:

    Starting July 24 2009 consumers who would like to purchase a new car trading off their old gas guzzlers can use

    the Cash For Clunkers program voucher.

    jwhenry

    Blogger

    www.cashforclunkersfacts.info

    http://www.cashforclunkersfacts.info

  • Report this Comment On July 17, 2009, at 2:55 AM, yamazed wrote:

    There are some new surprises and good, in fact very good, news that is coming in August for Sirius XM (SIRI). It isn't the financial end of quarter report but something else something most investors will be very happy to hear... Just wait thight and watch out for the news... Can't say more.

  • Report this Comment On July 17, 2009, at 7:34 AM, toopersent wrote:

    I actually like the Garmin play. What a lot of the smartphone providers DONT tell you about their GPS services is that they don't work off network. That means if you are going camping in a rural area and don't know how to get there, you probably wont be able to rely on your smartphone. Not to mention you usually have to pay a monthly premium for the service. Not with stand alone GPS, at least not the one I have.

    As for the affordability of GPS systems, they are getting cheaper and cheaper. Just about as cheap as a smartphone actually.

  • Report this Comment On July 17, 2009, at 9:26 AM, wordcarr wrote:

    There will never be a big enought customer sub base to pay the cost of the up link.Without additional revenue streams Sirius will fail.Sat audio channels will become main stream media one day, but not the Sirius buz model.

  • Report this Comment On July 17, 2009, at 10:44 AM, willi632 wrote:

    All I can add... is that I own three vehicles, the only one with satellite radio is my twenty year old Honda Accord. Had the satellite radio installed for $100 5-years ago. The other 2 cars are less than 3 years old, and one is a luxury vehicle. Guess which car I usually end up driving? You guessed it... the 20 yr. old accord. That says something.

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