Before I start, don't get me wrong, but I like XMSR as an investment right now as well. I am speaking from the shear mechanics of WallSt. Become a Complete Fool
I just don't understand it. XM receives bad news (that it is going to court); SIRI drops. XM receives good news (that it renewed two contracts); SIRI drops.
Did anyone take into account that NEITHER of these two pieces of news negatively affects SIRI in any way shape or form? Yet the stock has dropped nearly 13% in the past three weeks.
The XM lawsuit does not affect SIRI in any way, because regardless of the outcome, SIRI already has an agreement with the music companies for the portable recording of music. Not only that, these agreements have already been priced into SIRI quarterly income figures. XM on the other hand, if they loose the lawsuit, will have to pay a settlement PLUS obtain an agreement for a price with the music companies, which I'm sure will be higher than SIRI's, all of which has not been priced into anything. So why does this hurt SIRI?
XM receives the good news that two of its contracts have been extended for factory installations. They were companies that XM already had agreements with, they were contracts that were not set to expire until 2010 anyway, and one of the companies still has SIRI installed in an aftermarket deal with SIRI, which does not change. I can see where it would be disappointing for SIRI stockholders, but it should not come as that big of a surprise, especially considering Honda has nearly a 7% stake in XMSR with over 20 million shares. It should also be no surprise when GM renews its contract, for the same reason.
So what is it that makes people hate SIRI? Is it the fact that so many people lost a lot of money on the stock? Is it the fact that analysts had their nose rubbed in the dirt by their customers because of the huge drop in stock price?
There are so many compelling reasons to own Sirius Satellite Radio:
1) SIRI's subscriber growth is much better than XM's.
2) SIRI and XM reported positive cash flow in the same quarter; even through SIRI is behind on the "business line", being 2 years "younger."
3) SIRI management is well known in the mergers and acquisitions dept.
4) While still heavily in debt, it is beginning to take steps at cost control. While still behind XM, it is also 2 years behind on the business line and will catch up quickly.
5) XM is owned by institutions. Institutions hold nearly 90% of the company. SIRI on the other hand, is only 28% owned by institutions. The biggest reason for this is many institutions have a rule that states they cannot own a company that has a stock price under $5. When/If SIRI hits the $5 mark and maintains that, you will see many more institutions buying in, which will drive the stock up further.
6) In a curious sign of loyalty, SIRI's short sellers abandoned ship last month. December showed 141.09 million short shares, but January saw that number drop to 118.87 million. This 22 million drop represents 15.75% drop in shorts. Compare that to XMSR who went from December number of 33.11 million to January number of 33.98 million, a nearly 3% GAIN of shorts.
7) In the flurry of recent upgrades and downgrades of SIRI and XMSR, more than one analyst has already PUBLICLY stated that SIRI will surpass XMSR by 2009 in total subscribers, making SIRI that "best of breed" in the industry, something that most of us knew already.
8) Speaking strictly as a customer, SIRI broadcasting is far superior to that of XM. In the places where customers have a CHOICE of which SatRad to go with (i.e. Retail) people choose SIRI over 60% of the time. This customer loyalty and brand recognition will be the key driver to SIRI's success.
9) Howard Stern, as much as I personally detest him, has done wanders for SIRI. I think it was the best move they could have made, and I don't think the price tag was too high for what he was able to do.
10) Hugh Panero sucks. Mel Karmazin rules. Mel is a real go-getter and someone that makes things happen. I just don't see that from Panero. I see Mel taking over when/if the SIRI/XMSR merger happens, with Hugh being pacified with a board seat and an executive title and a nice buyout.
11) Hugh Panero has a total of 155k shares in XMSR, ALL of which were GIVEN TO HIM. The only stock purchased by him was via stock options, which he turned around and sold the entire lot the same day (not paperless trade). Mel on the other hand, over the last two years has never received free stock from SIRI. He has PURCHASED 2 million shares for a combined cost of almost 11 million dollars out of his pocket. Mel owns a total of 6.5 million shares. Who has confidence in their company?
Ok, enough of a rant. I've said my piece. I will also be posting this in the SIRI forum, as well as my personal blog. Feel free to comment, good or bad. I want to see the other side of the argument.
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Before I start, don't get me wrong, but I like XMSR as an investment right now as well. I am speaking from the shear mechanics of WallSt.
Become a Complete Fool