The following article is part of The Motley Fool's "Stock Madness 2005," a contest based loosely on the annual NCAA College Basketball Tournament, a.k.a. March Madness. From March 17 to April 4, our writers and analysts will engage in head-to-head competition with each other, advocating and arguing on behalf of 64 stocks we've selected as among the most interesting to Foolish investors. You, dear readers, are the fans and referees -- you'll read these exciting duels and then vote for the stock you think is the better investment... and should therefore move on to the next round of play. The company that survives six "games" will be our tournament champion, and its writer our most valuable "coach."

But, please, make no mistake -- "Stock Madness 2005" is a GAME!

Our writers are doing this for fun. They are enjoying the spirit of competition and the art of debate. They are delighting in the search for positives in the companies they've drawn... and negatives in the companies they're pitted against. They are NOT necessarily recommending these stocks as the ones they believe in above all others. As ever, YOU must decide whether the stocks we're writing about -- winners and losers -- are deserving of your investment dollars.

Sirius Satellite Radio (NASDAQ:SIRI)
New York , N.Y.
52-week low-high $2.01-$9.43
$7.04 billion market cap

By Tim Beyers (TMFMileHigh)

I can't say I'm thrilled to be matched up against Altria in the second round of our Foolish tourney. But I'm not scared, either. That's because Sirius' growth potential is vastly superior to that of the cigarette king.

There's expected to be more than 8 million satellite radio subscribers by the end of the year. Let's figure that rival XM (NASDAQ:XMSR) will get 60% of the new catches. That would still leave Sirius netting at least 2 million new subscribers in 2005. And that would put Sirius' revenue heading into 2006 at no less than $480 million, a 600% improvement. But this is going by conservative estimates. Sirius could find a way to sign more customers than XM does, with Howard Stern and NASCAR joining the Sirius lineup.

Speaking of Stern, consider that in 2006, all of his 10 million listeners will have to decide whether to switch to Sirius. Even if you figure that all of the company's projected 3 million listeners by then are Stern listeners, that's still 7 million with a decision to make. It's not unreasonable to think that at least 2 million of them will become subscribers. Bingo. That's 5 million listeners, at least, by the end of next year. No wonder Sirius thinks it can be cash-flow positive by 2007. At its current growth rate, by 2010 Sirius will nab at least 20 million subscribers -- the number XM predicts it will have by then -- and will become a $3-billion-a-year entertainment titan. No wonder Foolish colleague Rick Munarriz, coach of vanquished XM, calls Sirius a Rule Breaker.

Finally, remember that this contest is about what stock would do better for the Foolish investor. There's a reason analysts expect Altria's five-year growth to be less than that of the S&P 500, and there's an equally important reason why they expect Sirius to grow five times faster than the market over the same period. I humbly ask for your vote.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in the story at the time of publication. You can find out what is in Tim's portfolio by checking his Fool profile.

Altria (NYSE:MO)
Richmond , Va.
52-week low-high: $44.50-$68.50
$133.9 billion market cap

By Mathew Emmert (TMF Gambit)

I think my friend Tim may have accidentally cashed in his reality check here. Sirius is a stretch, plain and simple. You have to look no further than the difference in beta (the measure of a stock's relative volatility) between these two companies to see the significant risk facing this satellite radio upstart. Sirius has a beta of about 4.2, meaning it moves more than four times the change in the market on any given day. Altria, on the other hand, has a beta of 0.5, meaning it tends to move half as much as the market. There's a reason for that -- actually, many reasons.

Not to take away from Howard Stern's brilliance as the comedic king of smut, but I don't want anything to do with a company that puts all its eggs in one, or even two, baskets, especially when those baskets are precariously balanced on the fickle whims of pop culture.

Don't get me wrong -- the next best thing to a monopoly is a duopoly, and that's basically what Sirius enjoys. But let's get real. Despite satellite radio's appeal, it doesn't quite have the addictive power of Altria's products -- nicotine and cheesy macaroni, to name a couple -- so Altria will always come out on top.

We don't even have to talk balance sheet, but I will anyway. For Sirius: negative free cash flow until 2007. For Altria: nearly $10 billion in annual FCF right now, today. I'll stick with Big MO, thanks.

Though some would argue that Altria faces significant legal issues, Sirius is going to have to confront its own regulatory uncertainties surrounding its relatively new distribution methods. As in Round One, however, much of this battle could really come down to valuation. Big MO's shares are trading at a nice discount to intrinsic value, Sirius, not so much.

When it's all said and done, I'm a buyer of Altria -- and if you already own it, I'd consider getting a little MO. The truth is, we Altria lovers may huff and puff from time to time, but in the end, there's no doubt that we'll blow your house down.

Mathew Emmert, editor of Motley Fool Income Investor , owns shares of Altria.

Want more programming? Fine. How about the NCAA hoops tourney? How about TheMotley Fool Radio Show? And on valuation: High-growth firms such as Pixar and rival XM trade for as much as 20 times sales today. Estimates peg Sirius' revenue at $3 billion by 2010. Take an average 10x multiple, and you've got a four-bagger. A 5x would result in more than a double. Big MO simply won't get anywhere near that. -- T.B.

The NCAA tournament lasts a few weeks a year, which leaves quite a bit of dead air space. Then there's the $100 million per year cost of its only major full-year contract -- a figure that might be covered by FCF in the year 2010, a space catastrophe. That ignores share dilution, so I think it's safe to say that if Sirius keeps negotiating such stellar deals current shareholders will break even in 2000Never. The Internet bubble must have reinflated overnight if you're pulling relics like "price-to-sales" out of the dustbin. I live in the world of risk-adjusted returns, and in that world, even 10 times nothing leaves you with nothing. I'll stick with something, thanks. -- M.E.

Who won? Go here to cast your vote.

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