Digital Radio Central - Sponsored by TSS Radio
  DRC Home Page DRC Forums Contact Us  
 
SIRIUS Backstage Forum
 
 
 
  Sirius Satellite Radio XM Satellite Radio iTunes/iPod Slacker Pandora  
 
 
FAQ Members List Calendar Search Today's Posts Mark Forums Read  
Go Back   SIRIUS Backstage Forum > >
Visit Digital Radio Central

Notices

The Street Converse with other investors about finance, economic and investment strategies. This is also the place to discuss SIRIUS XM company news and your favorite stocks.

 
 
Thread Tools Display Modes
 
 
Old 06-06-2006, 08:44 PM   #1
4BAMA
Rocket Scientist
 
Join Date: Feb 08, 2004
Posts: 514
4BAMA is on a distinguished road
Default Oem

interesting car dealership survey by smithbarney. alot of upside potential 4 sirius and xm.

OUR VIEW: RETAIL SUB GROWTH SLOWING, BUT OEM GROWTH SHOULD
PICK UP THE SLACK AND HELP MOVE STOCKS FROM HERE

* America Online (AOL) Study Sheds Light and Why Satellite Radio is Different

* For AOL, Slowdown in Growth was Permanent: For AOL, when Y/Y growth in
subscriber net adds turned negative it proved to be the first sign that
absolute subscriber growth was coming to an end and an ideal point to
exit the stock. AOL's subscriber base began to erode in early 2003 and
continues to do so today.

* First for Satellite: Unlike AOL, it Controls the Share Winner (OEM) and
Share Loser (Retail): Unlike AOL which lost market share to unrelated
parties (DSL and Cable), satellite radio's current weakness is
attributable to a market share shift from satellite radio purchases in
the store (Retail) to purchases from auto dealerships (OEM), not a shift
to some outside hostile competitor. So here, satellite radio is both
the market share loser and the market share winner.

* Second for Satellite: Unlike AOL, Growth in Total Subscribers Should
Continue: Without the OEM channel, we would view satellite radio's
current slowdown as the beginning of the end. But, the expected health
in OEM sub growth makes us feel otherwise. While AOL ultimately saw its
subscriber base erode in 2003 and continue today, we expect the
satellite radio industry to grow its subscriber base for the foreseeable
future and in double digits for the next 6 years.

* Third for Satellite: Valuations Have Not Yet Popped Like AOL: When AOL
was at the same point in its life cycle as satellite radio sits today
(in terms of number of subscribers and lack of free cash flow), its
stock price had not yet popped. Indeed, AOL did not reach its ultimate
stock price peak until its subscriber base reached 20.5 million and it
was free cash flow positive. If the same holds true for the satellite
radio industry, the stock price peak would not be reached until year-end
2007, which is when we expect the satellite radio industry to also reach
20.5 million subscribers and deliver operational FCF profits.

* Fourth for Satellite: Valuations are Cheap: Taking '09 FCF and
discounting back, XM and SIRI trade at a P/FCF multiple of 20x and 14x
respectively. At 14x, XM is trading at a FCF valuation level lower than
where AOL (TWX) has ever traded, even after its sharp decline. Further,
at 14x, XM is cheaper than slower growth newspapers (at 17x) and near
radio (at 15x). We set our XM and SIRI target price at multiple on '09
FCF (discounted back) of 20x and 33x, respectively. Thus, our target
price (set 2 yrs after FCF profits) sits at 1/3 to 1/2 the valuation
that AOL got at the same point in time. Also, our target P/FCF valuation
for XM and SIRI is set near or below AOL's average P/FCF multiple over
the past 5 yrs of 32x.

* Future OEM Launch Schedule Support Our View: In examining current
penetration commitments by the OEM partners for XM and SIRI, we can clearly
see a ramp up is in the near future and this increase in satellite-ready
factory installed tuners should "push" consumer subscription rates to
handily meet our current subscriber estimates and long-term 2015 penetration
goal of 22% of cars or 20% of the 18+ population.

* Proprietary Dealer Survey Results Support Our View: Further, our extensive
dealer survey suggests that already strong consumer demand for factory
installed satellite radios is on the rise. It also suggests that very
little is currently being done at the dealer level to support current
conversion rates, leaving substantial low-hanging fruit for improvement. We
believe even the most modest improvement in terms of OEM and dealer push
could lead to greater than currently expected support for conversion rates.

VALUATION TALE OF TWO CITIES

With OEM and Retail subscriber growth rates for the satellite radio industry
beginning to diverge, we have conducted a sum of the parts valuation analysis
on both XMSR and SIRI. Our valuation analysis is based on our forecasts for the
OEM and Retail businesses on an artificial stand-alone basis through 2015, with
higher multiples assigned to both companies' OEM businesses, given the more
favorable longer term growth profile, and new lowered multiples assigned to
each company's Retail segments. Key Conclusion: Current stock prices and
valuations appear attractive for longer term investors with our analysis
supporting our current price target of $21 on XMSR, representing 43% upside
from current levels, and $7.50 for SIRI, representing 66% upside from current
levels. We reiterate our Buy Rating on both XM and Sirius Satellite radio with
a belief that OEM growth will move stocks higher from here.

SLOWING GROWTH TEMPORARY OR PERMANENT? -- AOL CASE STUDY SHEDS LIGHT


https://www.smithbarney.com/app-bin/...s/QuoteServlet
4BAMA is offline  
 
 
Old 06-06-2006, 08:45 PM   #2
4BAMA
Rocket Scientist
 
Join Date: Feb 08, 2004
Posts: 514
4BAMA is on a distinguished road
Default

While Growth Slowing in Retail, OEM Channel Should Pick up the Slack

With profitability still in the future, valuing satellite radio stocks can be a
challenge. As such, investors tend to focus on near term metrics with the most
influential one being subscriber growth. Subscriber growth itself can be
looked at in a variety of ways, but we believe Y/Y growth in subscriber net
adds along with Y/Y growth in total subscribers to be both important metrics.
We've seen significant pressure on the satellite radio stocks stemming from a
number of events including a slowing of subscriber growth. More specifically,
the beginning of the downward decline in XM stock coincided with the first time
we saw a Y/Y decline in OEM net adds in 4Q05 and as worries began to mount over
its ability to continue to grow retail net adds in the face of Stern. Further,
with only two players in the space, and Sirius' higher relative valuation, SIRI
stock felt downward pressure as well. However, the key question really remains
whether or not the current slowing of sub growth felt at XM, and to a lesser
extent for the industry as a whole, marks the beginning of the end of growth,
or is temporary in nature -- we believe the latter to be true.

For AOL Slowdown in Growth was Permanent . . .

To better understand whether slowing growth represents a terminal cancer to a
stock, or not, we revisit our comparison of the satellite radio space against
AOL. We would note that in retrospect the best time to exit AOL stock was in
December of 1999 which also happened to correspond with the first time AOL saw
a negative Y/Y growth in subscriber net adds. In other words, it was the first
time net adds in the quarter were less than the net adds in the prior year,
although still positive. However, in the case of AOL this slowdown in net add
growth ended up being permanent. AOL ultimately moved from just a slowdown in
growth to actual subscriber base declines starting in 2Q03 and persisting ever
since, with a return to subscriber growth unlikely. For AOL the slowdown in
subscriber growth started as broadband took hold. In other words, as broadband
ISPs gained popularity new to the Internet subscribers jumped directly to
Broadband Internet service. This sea change inured to the benefit of DSL and
Cable broadband providers at the expense of narrowband ISPs such as AOL. So
for AOL negative Y/Y growth in subscriber net additions was later followed by
ongoing erosion to its total subscriber base, so the slowdown was a sign of the
beginning of the end to absolute subscriber growth.

WHY SATELLITE RADIO IS DIFFERENT

First, Satellite Radio Controls Share Winner (OEM) as well as Share Loser
(Retail)

Turning to satellite radio, we've also seen a slowdown in Y/Y growth in retail
net adds, most prominently at XM. We saw XM face negative Y/Y growth in Retail
net adds for the first time in 1Q06, and for with the exception of 4Q06 and
1Q07 (fueled by Oprah), we expect this trend to continue for the foreseeable
future. This slowdown in net adds in XM's retail channel has also served to
pressure overall net adds. Similarly, though not quite as soon, we expect
Sirius to begin to see Y/Y declines in subscriber net adds in its Retail
business starting in 4Q06 and going forward. So the key question is whether
this is like AOL and marks the beginning of the end in terms of solid
subscriber growth, or if this is a temporary slowdown, and we believe the
latter to be true. In the case of AOL, its slowdown was caused by a permanent
trend of market shifts toward broadband. But in the case of satellite radio,
we believe the slowdown in subscriber growth in the retail channel is due in
large part to consumers becoming subscribers through the OEM channel when they
buy their car, decreasing the need for them to purchase a satellite radio in
the retail channel.

Without the OEM channel, we would view satellite radio's current slowdown as
the beginning of the end, but health in OEM makes us feel otherwise.

Figure 1. Satellite Radio Industry Subscriber Net Additions and Growth

As seen in Figure 1 above, for the foreseeable future Retail subscriber net
adds are likely to be smaller than the year prior. But, overall subscriber net
adds for the industry should continue to grow due solely to robust growth from
the OEM channel. We expect double digit Y/Y growth in subscriber net adds for
the industry to continue throughout 4Q07. So, unlike AOL which lost market
share to unrelated parties (DSL and Cable), satellite radio's current weakness
is attributable to a market share shift from satellite radio purchase in the
store (Retail) to purchase from auto dealerships (OEM), not a shift to some
outside hostile competitor. So in this case satellite radio is both the market
share loser and the market share winner.

Second, Unlike AOL Absolute Growth in Subscribers Should Continue

Another important distinction to make is that unlike AOL, we expect growth in
its total subscriber base to continue for the foreseeable future. As seen in
Figure 2, we saw AOL subscriber growth start a decline in 2003 and has not
recovered since. In contrast, we expect growth in satellite radio subscribers
to continue to be strong for the foreseeable future and beyond our 2015
estimates almost 10 years away. Near term we expect the industry will grow its
subscriber base by a strong 87% in 2006. We expect to continue to see double
digit growth subscriber growth for satellite radio to continue for the next six
years. Again the primary difference here is that while AOL lost share to other
players, satellite radio's current weakness can be largely attributed to a
shift from satellite radio purchases from the store to satellite radio
purchases from the OEM dealerships. So satellite radio is still able to
capture growth from the OEM side of its business while AOL's growth moved to an
outside competitor (Cable and DSL).

Figure 2. Satellite Radio Industry Subscriber Net Additions and Growth

Third, Satellite Radio Valuations Have not Yet Popped Like AOL

So the next question is have we already passed the stock price peak for the
satellite radio names or is it still to come. If the AOL example holds true,
we believe the satellite radio stocks should begin to perform from here and
have not yet reached there peak. In Figures 2 and 3 we see that we are
expecting total satellite radio industry subscribers to reach 14.7 million by
the end of 2006, which is the exact number of subscribers AOL reached in 1998.
This 14.7M sub milestone was well before AOL's stock price popped. Instead at
this time at mid-1998 AOL's stock stood at roughly $10, well off its $95 peak
reached at then end of '99.

Figure 3. AOL Vs. Satellite Radio Growth

-------------------------------------------------------------------------------
----------------

Source: Citigroup Investment Research

AOL did not reach its ultimate stock price peak until its subscriber base
reached 20.5 million in 1999 and was free cash flow positive. If the same were
to hold true for satellite radio, the peak won't appear until the end of 2007
when we expect the satellite radio industry to reach 20.5 million subs and
operational free cash flow profitability. We also note in Figure 3 that AOL's
stock price peaked 3 years before it began to see erosion in its subscriber
base. However, in the case of Satellite Radio, we do not expect to see erosion
in its subscriber base in the foreseeable future and beyond our subscriber
forecast to 2015 which itself is 9 years away. Assuming the AOL analogy holds
true and given current valuations of an implied adjusted P/FCF of 14x for XM
and 19.5x for SIRI, we would argue that the satellite radio companies have not
yet seen the type of pop to their stock that we've seen for other high growth
subscription businesses like AOL. While we do not have the hubris to suggest
that the satellite radio valuations will approach anywhere near the type of
gravity-defying levels of AOL when it hit 135x P/FCF, we do expect valuations
to rise significantly from here.

Fourth, Satellite Radio Valuations are Relatively Cheap

Understanding that valuation can be tricky when profits are yet to be had,
nonetheless we make an attempt here by comparing Satellite Radio valuations
with those actually achieved by AOL. With FCF profits still off in the future,
for satellite radio we look at a point that is past the point of profitability
and discount it back to today. More specifically, in Figure 4 below we take
FCF just one year past industry OCF profitability (in 2008), and discount it
back and see that XM and SIRI are currently trading at an implied 26x and 21x
P/FCF multiple, respectively. For AOL at this same point in time one year past
FCF profitability, the stock was trading at an astounding 135x P/FCF.
Similarly, if we were to look two years past the point of FCF profitability
(the best time frame in our view), XM and SIRI are trading at an implied 14x
and 20x P/FCF multiple, compared with AOL at that same point in time of 64x.
At 14x, XM is currently trading at an implied '09 P/FCF that is lower than that
which AOL has ever traded and cheaper than the much slower growth newspapers at
17x and radio at 15x. Even moderate growth sectors like Entertainment trade at
21x '06 P/FCF while faster growth Internet stocks trade at 33x to 60x '06
P/FCF.
4BAMA is offline  
 
 
Old 06-06-2006, 08:48 PM   #3
4BAMA
Rocket Scientist
 
Join Date: Feb 08, 2004
Posts: 514
4BAMA is on a distinguished road
Default

Figure 4. Comparison of Satellite Radio Vs. AOL (TWX) in Stock Price
Performance and P/FCF Valuation

In that context we believe our target price valuation appears conservative.
Specifically, we set our target price for XM and SIRI at an '09 P/FCF multiple
of 20x and 33x, respectively, which is 1/3rd to 1/2 the valuation that AOL
received at the same point of 2 years past the point of FCF profits. Our
target valuation for XM P/FCF valuation sits in line with slower growth
entertainment names and at a P/FCF-to-growth of 0.5x. Our SIRI target price
sits at a premium to the entertainment sector but still remains at a modest
0.9x P/FCF-to-growth ratio. Another way to look at it is that our '09 P/FCF
target for XM and SIRI are set near or below the average P/FCF multiple that
AOL (TWX) has actually seen over the past 5 years of 32x.

FUTURE OEM LAUNCH SCHEDULE -- SUPPORTS VIEW THAT SUB GROWTH WILL CONTINUE

Industry Retail Net Adds are Slowing, But We Expect OEM to More than Compensate

As discussed above in Figure 1, we expect Y/Y subscriber net add growth for
satellite radio from the retail channel will continue to slow and that net adds
from 4Q06 and thereafter will continue to be less than those generated the year
before. But, in direct contrast we expect that satellite radio subscriber net
adds from the OEM channel for the next several years will continue to be larger
than those delivered in the previous year. But, when we parse through more
granularly, the story is less clear. In the case of Sirius, today Retail
growth continues to be strong fueled in part by Stern, with the inevitable
slowdown in Retail net adds pushed out until 4Q06 when they anniversary Stern-
related sales. At the same time Sirius has a strong OEM ramp up year planned
in '06 making its overall sub growth strong. At the same time, XM's retail
channel has already started to show signs of Y/Y declines in net adds and this
is even more apparent given that its OEM ramp up does not begin in earnest
until 2007 and 2008. Despite variations in timing, the message is still the
same: We expect the overall slowdown in Retail net adds to be more than
compensated by increasing growth in the OEM channel as the auto manufacturers
continue to increase the penetration of factory-installed satellite radios.
With the lead time from decision to execution for a factory-installed satellite
radio any where from 1 1/2 to 2 years, we already have a clear picture of what
the OEM ramp up looks like for the '06 and '07 model years. Armed with this
knowledge we believe that the already committed to OEM launch schedule fully
supports are view that growth in the OEM channel will more than outweigh the
industry's current slowdown in the Retail channel.

XM: Planned '07 OEM Penetration Should Lift Growth in Net Adds to Double
Digits

For XM Satellite, we believe that the company's execution missteps in 2006 will
give way to better growth in 2007 fueled by health in its OEM channel. In
2006, XM is caught in a transition period due to sluggish GM car sales with the
GM penetration rate expected to grow by only 400 basis points to 36%, in
comparison with the 10,000 average annual basis point increase we'd seen over
the past two years. While still a respectable increase in GM penetration rate
expected for 2006, it nonetheless represents a near term deceleration. But XM
should be back on track in 2007 as it benefits from the start of new factory
installation programs at Toyota, Nissan and Hyundai. Given long lead times,
the bulk of our expectations of 2007 OEM penetrations have already been
announced and committed to by XM's OEM partners and thus carry greater
certainty.

XM: '07 Likely the Tip of the Iceberg, with Larger Penetration Increases Ahead

We believe we are still in the earliest stages of OEM penetration ramp up of
factory installed satellite radio as highlighted by our estimates for XM's OEM
penetration shown in Figure 5 below.

Figure 5. XM Satellite -- OEM Penetration Rate of Factory-Installed Satellite
Radios

--------------------------------------------------------------------------

Source: Citigroup Investment Research

Specifically, we expect already established OEM partners like GM and Honda to
move from an estimated 32% and 29%, respectively, in 2005, to 58% and 57% by
2015. For newer OEMs Toyota, Nissan and Hyundai, the ramp up will likely be
even more dramatic with Hyundai already committing to make XM standard in all
its vehicles by CY2008 and Nissan targeting XM volumes that imply 85%+
penetration by the 2010 model year. We estimate that XM's penetration rate into
Toyota, Nissan and Hyundai will increase from 1%, 4% and 0% in 2005 to 17%, 19%
and 87% for 2007 -- the first full year of XM's factory installation program,
and to 48%, 92% and 100% by 2015.

XM: Deeper Penetration Should Translate Into Double Digit OEM Sub Growth

Rapidly rising penetration rates of factory-installed satellite radios should
translate into a rapidly expanding OEM subscriber base for XM. We are
forecasting XM to end 2006 with 3.3 million OEM subscribers, representing an
increase of over 1 million from 2005. For 2007, with XM adding Toyota, Nissan
and Hyundai to the mix, we are forecasting 4.7 million OEM subscribers by year
end, a 42% Y/Y increase or about 1.4 million new net OEM subscribers over the
prior year. By 2015, we project that XM will reach 14 million OEM subscribers,
representing 50% of XM's total subscriber base, up from 39% of the subscriber
base in 2005. Further, our OEM forecast represents a 2005 -- 2015 subscriber
CAGR of 20%, versus a lower 15% CAGR for the Retail side of its business and an
overall subscriber CAGR of 17%.

Figure 6. XM Satellite -- OEM Total Subscribers

--------------------------------------------------------------------------

Source: Citigroup Investment Research

SIRIUS: 2006 Strong OEM Ramp Year and 2007 Should Bring More of the Same

Sirius is already the midst of a strong year for its OEM channel benefiting
from continued strong ramp up at Daimler Chrysler and Mercedes as well as the
initial ramp up with Ford, the second largest car dealer in terms of market
share. Ford in particular is making a difference in 2006 for Sirius given that
it is a relatively newer OEM partner, with its factory installation program
only beginning at the end of 2005. At the same time Sirius in general is still
in an early stage of OEM penetration compared with XM. Only with Daimler
Chrysler, which began factory installations in 3Q04, is Sirius approaching the
penetration rate that XM has already reached with GM and Honda (about 30%-33%).
Looking ahead to 2007, Sirius should continue to see robust OEM subscriber
growth primarily driven by continued strong ramp up already committed to by
Ford as well as the initial ramp up at Volkswagen. So while Volkswagen
represents only 2% of U.S. cars sold, they have set a lofty goal of 80%
penetration in its 2007 model year vehicles. We would also point out, like
XM, given long lead times, the bulk of our expectations for 2007 OEM
penetration have already been announced and committed to by Sirius' OEM
partners and thus carry greater certainty.

SIRIUS: Even Beyond '07 Larger Penetration Lies Ahead
4BAMA is offline  
 
 
Old 06-06-2006, 08:52 PM   #4
4BAMA
Rocket Scientist
 
Join Date: Feb 08, 2004
Posts: 514
4BAMA is on a distinguished road
Default

Despite robust OEM penetration increases in 2006 and 2007 we believe there is
still more to come for Sirius. Figure 7 highlights our current penetration
estimates for 2007 and beyond and as you can see we believe we are still in the
earliest innings of the OEM penetration rate ramp for Sirius.

Figure 7. Sirius Satellite -- OEM Penetration Rate

--------------------------------------------------------------------------

Source: Citigroup Investment Research

We see Sirius increasing its penetration rate at Daimler Chrysler and Ford from
19% and 4% in 2005 to 33% and 13% for 2007. From there, we see Sirius steadily
increasing its rate to 50% for Daimler Chrysler and 41% for Ford in 2015. For
Mercedes, BMW and Sirius' other OEM partners (which include Kia Motors and VW),
we estimate that Sirius' penetration rate will increase from 15%, 11% and 5%
respectively, in 2005 to about 75%, 42% and 20% by 2015. Kia has been
particularly aggressive and has announced its plans to make Sirius a standard
feature (or 100% penetration) in its 2009 model year cars.

SIRIUS: Deeper Penetration Should Translate Into Double Digit OEM Sub Growth.

Similar to XM, rising OEM penetration rates across its auto OEMs should
translate into a robust OEM subscriber growth for Sirius. For 2006 we forecast
Sirius' OEM subs to grow by a robust 116% to 1.8 million OEM subscribers,
representing an increase of nearly 1 million from 2005. For 2007, with Sirius
increasing its penetration rate at all of its OEMs (and particularly at Ford),
we are forecasting continued robust growth of 61% to nearly 2.9 million OEM
subscribers by year end, an increase of about 1.1 million OEM subscribers over
the prior year. By 2015, we expect Sirius to reach 8.8 million OEM
subscribers, representing nearly 40% of Sirius' total subscriber base, up from
25% of the subscriber base in 2005. Also, our OEM forecast represents a 2005--
15 subscriber CAGR of 27%, vs. a lower 20% CAGR for the Retail side and an
overall subscriber CAGR of 22%.

Figure 8. Sirius Satellite -- OEM Total Subscribers

--------------------------------------------------------------------------

Source: Citigroup Investment Research

With Conservative Factory Install Estimates Sat. Radio Should Still Reach Our
LT Sub Estimates

In summary, we believe even our current conservative estimates for factory-
installed satellite radios will enable the industry as a whole to reach our
2015 goal for satellite subscribers of 52 million (22% of cars or 20% of the
18+ population). Unless otherwise already explicitly announced, our 2015
estimates for factory-installed satellite radios generally sits below 50% for
any given OEM automaker, which we believe could prove conservative. We see
increasing evidence that satellite radio may become standard (or 100% factory-
install penetrated) with the trend toward standardization in the car of
satellite radios picking up momentum. We've already seen Hyundai and Kia state
plans to have satellite radio be standard in all vehicles. We've also seen
companies like Volkswagen and Audi commit to 80% penetration rates in the not
too distant future. While the largest domestic and Japanese auto makers have
yet to commit to such aggressive penetration goals it remains a distinct
possibility that they will do so. If any of these remaining OEM partners makes
such a move toward standardization of satellite radio in the car, our current
OEM subscriber estimates may prove conservative. Further, atop conservative
factory-install estimates, our 2015 goal for 52 million subs takes into
consideration a continued long-term decline in conversion rates from 54% to 42%
by 2015.

CAR DEALER SURVEY RESULTS ==> OEM CHANNEL GETTING STRONGER WITH MORE ROOM TO GO

Over the past several weeks, we conducted a car dealership survey by completing
75 calls to car dealerships across the U.S. Our car dealer Satellite Radio
survey questions were grouped into six main categories: (1) Customer Interest
Level; (2) Long term View (growth, possibility of going standard, etc.); and
(3) Dealer Role (incentives, education, etc). Key Survey Takeaway: (1)
Satellite radio still remains in the early stages of growth with already strong
consumer demand which is on the rise; and (2) little is being done at the
dealer level to support current conversion rates leaving low hanging fruit for
improvement.

Our specific results are detailed below.

CUSTOMER INTEREST IN SATELLITE RADIO IS ON THE RISE

The first set of questions we posed to dealers was to try and gauge customer
interest and awareness of satellite radio at the ground floor level. Our
takeaway is that satellite radio tends to be a product that customers in the
know are passionate about and that interest level is rising quickly. However,
there still remains a sizable population which has little exposure to the
product, and the dealers have not yet ramped up to their full potential in
pushing this awareness level higher. As such, we believe we are still in the
early stages of the "pull" stage of satellite radio and still have room for a
later "push" stage to follow.

Question 1: Dealers Admit 70% of Satellite Radio Conversations are Initiated
by The Customer

In our first question we asked all the dealers in our survey whether or not
they typically initiate conversations regarding satellite radio or whether it
was something that the consumers themselves were asking for. The result, over
70% of those surveyed claimed that conversations regarding satellite radio, if
any, were initiated by the customer. In other words there is clearly consumer
demand for the product. Consumers today appear to be the primary ones driving
satellite radio sales in the OEM channel. In other words it seems clears that
satellite radio sales in the OEM channel appear to be more the result of
consumer "pull" as opposed to dealer "push."

Question 1. Do You Typically Initiate Conversations Regarding Satellite Radio?

Source: Citigroup Investment Research

Consequently, we think it's fair to say that of the 54% of OEM subscribers
opting to become a subscriber at the end of their promotional period, the bulk
of them are doing so based on their own desire with little nudging coming from
the dealers. However, another take away from this question is that dealers are
clearly not out there "pushing" the product since they are not even initiating
the conversations. One could argue that the demand for satellite radio is
already so high that there is no need for dealers to mention the product.
However, given the currently low level of unaided awareness of the product
(below 50% per Sirius) and low dealer incentives (mentioned in Questions 6-9)
that is unlikely the case. More likely the dealers themselves are reluctant to
"push" the satellite radio product and instead merely respond to any interest
that customers themselves may initiate. Anecdotal comments would support our
belief. Most sales people stated that they did not want to "throw customers
off" with a satellite radio pitch or "push something on them" that customers
did not want. Others claimed that they had no "incentive" to bring up
satellite radio and only responded when customers asked about it. Further, in
a few instances, the salespeople we spoke with were clearly uninformed all
together about satellite radio and did not know which car models it was offered
in, the difference between Sirius and XM, and any pricing information.

Question 2: Nearly 70% of Dealers Feel the Interest Level in Satellite Radio
Has Increased Over the Past Few Months

In this next question we tried to see from an insiders view whether interest in
satellite radio is on the rise, which it clearly is. Nearly 70% of car
salespeople surveyed claimed that customer interest in satellite radio has
increased over the past several months.
4BAMA is offline  
 
 
Old 06-06-2006, 08:54 PM   #5
4BAMA
Rocket Scientist
 
Join Date: Feb 08, 2004
Posts: 514
4BAMA is on a distinguished road
Default

uestion 2. Has the Interest Level in Satellite Radio Changed Over the Past
Few Months?

Source: Citigroup Investment Research

At the same time anecdotal comments paint an even more vivid picture with
comments like "tons of customers are asking for it," "the product has really
taken off over the past year," to "customers are asking for it all day long."
Further, several dealers attributed the increased demand at car dealerships to
the arrival of Stern on Sirius. In our conversations with dealers we walk away
with the belief that Satellite Radio is still in the early innings of growth.
We believe there is still room for increased awareness, and that this awareness
should help to stem pressure on conversion rates as satellite radios become
increasingly penetrated within car manufacturers and lower priced car models.
The next nearest push to awareness may come when XM launches its Oprah channel
and the marketing that will come with that both from XM and from Oprah herself.
Further, none of this considers any strides the OEMs or satellite radio players
may make in better motivating dealers to sell satellite radios.

Question 3: Satellite Radio in the Car is Desired Add On and Impacts Car Sales

In Question 3 we tried to engage just how important Satellite Radio was to
consumer, and for a majority of customers it appeared to strongly factor into
to car buying decisions. Specifically, over 60% of car dealers surveyed
claimed that satellite radio does impact the car sale, with customers opting
for a vehicle equipped with satellite radio versus one without it. This is
clearly a bullish sign and shows just how important satellite radio can be for
a certain sub segment of consumers. On the flip side, almost 40% that claim it
does not have an impact, many cited that some price-sensitive customers choose
to take a cheaper deal without a satellite radio to keep the overall car price
down. Others claimed that customers were more interested in other perks like
navigation or leather interiors. Finally, other salespeople said that some
customers would take the car with satellite radio, simply because it was part
of the package. For this less type of less driven consumer, any improvement in
dealer "push" of satellite radios could make a difference to ultimate
conversion rates.

Question 3. Does Sat. radio impact the sale? Will Someone Pick a Car w/ Sat.
Radio vs. one without?

--------------------------------------------------------------------------

Source: Citigroup Investment Research

DEALER'S INSIDER VIEW -- SATELLITE RADIO'S FUTURE LOOKS PROMISING

Question 4: 100% of Dealers Feel that More Vehicles will be Factory installed
with Satellite Radio Over Time

Interestingly, all car salespeople surveyed acknowledge that an increasing
number of vehicles will come either equipped with satellite radios or will come
"satellite radio-ready." Thus it seems clear that at least from a dealer's
perspective growth in satellite radio will continue.

Question 4. Do you think more vehicles will be factory installed with Satellite
Radio over time?

--------------------------------------------------------------------------

Source: Citigroup Investment Research

Question 5: 50% of Salespeople expect Satellite Radio to Become Standard in
the Car. Dealers clearly have a bullish view of Satellite Radio with about one
out of every two salespeople polled expecting satellite radios to become a
standard feature. Expectations for when this would occur ranged anywhere from
just a few years down the road to as many as ten years from now.
Interestingly, salespeople at BMW dealerships were more bullish on satellite
radio's prospects, generally claiming that satellite radio was "moving quickly"
toward becoming standard with expectations that it would become a standard
feature in no more than five years. For the one-quarter of respondents who did
not expect satellite radios to become a standard feature, several expected the
service to be confined to higher-end vehicles and not trickle all the way down
to more cost conscious car buyers.

Question 5. Do you think Satellite Radios Will Become Standard in the Car?

Source: Citigroup Investment Research

DEALER'S ROLE IN SATELLITE SALES IS MINIMAL --> LARGE OPPORTUNITY FOR
IMPROVEMENT

Our survey uncovers an apparent lack of dealer incentives to sell satellite
radios and limited dealer knowledge. Consequently we believe most of the
uptake of factory installed satellite radios to date has been driven by
consumer "pull," as opposed to dealer "push." In this light, XM's current 54%
conversion rate reported in 4Q06 seems bright and highlights that true consumer
demand for satellite radio exists. In other words, with minimal, if any,
assistance from car sales people, over 1/2 of new buyers of satellite radio
installed cars have chosen to become subscribers after their promotional period
ends, highlighting the strong consumer pull for this product. Our survey also
reveals that is large potential for improvement on the dealer level. We
believe that even the slightest increase in dealer "push" of the product as
they become more knowledgeable and savvy about upselling the product would make
a difference. Takeaway: Given current low dealer sales effort, 54%
conversion rate means strong consumer "pull" exists for Satellite Radio. Also,
ample room exists for improvement at the dealer level in terms of motivating
car salespeople which would positively impact conversion rates.

Questions 6-8: Apparent Incentives for Car Dealers to Sell Satellite Radio Low

In our survey, nearly 80% of car salespeople polled claimed to not receive a
commission for satellite radio sales. So while some argue that large revenue
shares with OEM partners have artificially propped up conversion rates, these
incentives have clearly not yet trickled down to the dealer level.

Question 6. Do You Get Incentives/Commissions to Sell Satellite Radio -- 77%
Say No

--------------------------------------------------------------------------

Source: Citigroup Investment Research

Further, as we see in Questions 7 and 8, for the roughly 20% that did
acknowledge a commission, all of them brushed it off as being too insignificant
for them to proactively pitch satellite radio to potential customers. Further,
many salespeople made additional comments that selling the car is their primary
focus, since that is where they generate the bulk of their income, and not on
small add-ons like satellite radios. While incentivizing or more effectively
training car salespeople to push satellite radio is a challenge, we believe any
even minor improvement in this area could have a significant positive impact on
conversion of customers to self-paying subscribers upon the expiration of their
promotional trial period.

Question 7. How Significant is the Question 8. Is the Commission Significant
Commission on Satellite Radio Sales, Enough to Make You Proactively Push
if any? Satellite Radios?

Source: Company reports and
Citigroup Investment Research Source: Company reports and Citigroup
Investment Research

Question 9: One-Third of Salespeople Do Not Demonstrate Satellite Radio.
4BAMA is offline  
 
 
Old 06-06-2006, 08:55 PM   #6
4BAMA
Rocket Scientist
 
Join Date: Feb 08, 2004
Posts: 514
4BAMA is on a distinguished road
Default

Also, almost 1/3rd of respondents admitted in question 8 that they did not give
a demonstration of how to use satellite radio or guide car buyers through the
activation process. One salesperson even claimed that some of his peers at his
dealership never even bother to tell car buyers that their car comes equipped
with a satellite radio, even once the sale has been completed. However, this
leaves 2/3rds of respondents who claim they do give customers a demonstration
of how to operate a satellite radio and/or how to activate the service once a
car purchase has been made. However, the extent of this demonstration varies
dramatically ranging from the simple end of showing how to switch from
terrestrial to satellite radio and back, to the more elaborate end where they
actually show how to activate the service when the promotional period ends (by
calling the 800 number with them and punching in the appropriate code) or
perform an actual run-through of the various channels that satellite radio
offers. However, not surprisingly the bulk of these demonstrations tend to be
on the simpler end of the spectrum.

Question 9. Do you give a demonstration of satellite radio or guide customers
through the activation process?

--------------------------------------------------------------------------

Source: Citigroup Investment Research

Incentivizing Dealers is Tough -- But Improvement From Here Should Be Possible.
Understandably, car salespeople are and will always be primarily focused on
selling cars where the bulk of their income is generated. As such, we realize
the challenge to get car dealers to focus on selling satellite radios is not a
simple one. But, given the low bar that is currently in place, we believe
progress from here is possible and that even the slightest improvement will
make a difference. Ironically, we have heard from car manufacturers themselves
that in internal surveys sales people that demonstrate satellite radios receive
higher customer satisfaction ratings. Thus, while they may not yet realize it,
there are some incremental benefits for dealers to push the product. From here
we see a variety of forces that should help the Satellite Radio industry battle
downward pressure on the OEM conversion rate. First, the satellite radio
players will continue to try out new ways to incentivize dealers and while
improvements here are tough, the bar is set fairly low. For example, with its
exclusive relationship with Penske dealers, Sirius can try out different
techniques at the dealer level to improve conversion rates, in a sense
utilizing Penske as a lab of sorts. Secondly, the satellite radio players will
continue to work to build a relationship with the car buyers directly in order
to lessen their reliance on the dealers. This can range from efforts to make
an end around dealers with attempts to contact the customers directly to make
sure they understand all the features of their included satellite radio. To
more simple measures such as including bright hang tags in the car which simply
describe the most basic features of the satellite radio and how to turn it on.
Other possibilities include retro-fitting cars so that the satellite radio is
the default radio setting that needs to be changed if the car owner wants
otherwise. Finally, increasing consumer awareness of satellite radio in
general should have a positive impact on conversion rates. With unaided
awareness below 50% according to Sirius, we still have a ways to go. But, as
awareness of the service inevitably climbs, and consumers become more informed
about the service, satellite radio's dependence on car dealerships to focus and
educate customers on satellite radio will lessen, which should positively
impact OEM conversion rates over time.

Despite Long-Term Pressure on Conversion Rates, Our OEM Estimates are
Achievable

Over the long term as satellite radio penetration increases and makes its way
down to lower priced cars thus targeting more cost conscious car buyers,
conversion rates will fall. The two main reasons consumers don't become a
subscriber following promotional periods has to do with price and utility.
Specifically, the most price-sensitive consumers as well as the occasional car
drivers are unlikely satellite radio customers. Thus, logically conversion
rates should fall over time as we move into deeper penetration into the cars
and begin to reach these less likely subscribers. That said, in the near term
conversion rates could prove erratic and even have short term lifts. There is
no question that one should expect lower conversion rates on lower priced cars
versus higher end cars. That said the cost of the car is just one factor in
understanding conversion rates. Another factor is how knowledgeable the
consumer is about the product and what effort the dealer has taken to try and
sell the product. Our survey revealed there is still much improvement that can
be found at the dealer level which could help stabilize conversion rates near
term. In other words, while downward pressure on conversion rates is
inevitable--- a partial offset is possible as dealers provide greater
information/help in the satellite radio sales process. Further, our current
2015 subscriber goal of 52 million (or 22% of total cars or 20% of the 18+
population) already considers that conversion rates will see a haircut from
here).

THE AUTO OEM MARKET LANDSCAPE

Auto Market Now Almost Completely Divided between Sirius and XM. With a couple
of additional OEM deals inked over the past few months by Sirius, nearly 100%
of the U.S. auto market has now been signed to exclusive deals by either Sirius
or XM.

Figure 9. Sirius Satellite and XM Satellite: U.S. Auto OEM Market Share

Source: Company reports and Citigroup Investment Research

On March 17, 2006, Sirius announced it entered an exclusive OEM partnership
with Volkswagen (and Audi) targeting a high 80% penetration rate of satellite
radio into new vehicles, beginning with Volkswagen's 2007 model year vehicles.
More recently, on April 13, 2006, Sirius inked a deal with Kia Motors for
Sirius to be a STANDARD factory-installed feature in Kia Motors vehicles
beginning in CY2008, with Kia's 2009 model year vehicles. With Volkswagen
representing about 2% of the U.S. auto market and Kia Motors representing an
estimated 1.5% of U.S. car sales, Sirius has brought its auto OEM market share
(through exclusive arrangements) up to about 42.5% versus XM Satellite's 56.5%,
as shown in Figure 9 above. This leaves only 1% of the U.S. auto market still
up for grabs with OEMs like Porsche and Suzuki still in only non-exclusive
deals with Sirius and/or XM.

Figure 10. Sirius Satellite and XM Satellite: Detailed Auto OEM Agreements

Source: Company reports and Citigroup Investment Research

Further, Figure 10 above provides an updated look at the details regarding
Sirius and XM's current OEM agreements, including vehicle models each
respective deal covers, length of the OEM agreement where it has been publicly
disclosed and targeted production volumes In total, Sirius radios are currently
available as a factory or dealer-installed option in 89 2006 model year
vehicles, while XM is available in over 120 vehicle models.

Trend toward standardization of satellite radios is picking up momentum. There
appears to be a strong and growing trend toward standardization of satellite
radios. In May of 2005 Hyundai surprised the auto world by announcing plans to
make XM Satellite a standard factory installed option in its vehicles, with XM
reaching 75% Hyundai penetration by the end of CY2006 and 100% thereafter.
Following in March and April of 2006, Sirius' announced OEM deals with
Volkswagen and Audi for 80% targeted penetration and 100% penetration into Kia
Motors. Specifically, Kia Motors plans to make Sirius Satellite a standard
factory installed feature in 100% of its model year 2009 vehicles, while
Volkswagen is targeting a high 80% penetration for Sirius radios into its 2007
model year automobiles. At the same time, Toyota recently announced that three
models in its Lexus LS line (representing about 1% of total Toyota sales) will
be the first Lexus models to offer XM as a factory installed feature, two of
which will carry XM as a STANDARD feature. As discussed before, other than the
aforementioned deals, our target penetration of factory installed radios in
2015 sits below 50% for the remaining auto makes and models. As such, if any
of the major domestic or market-share-stealing Japanese automakers decides to
follow suit, our current OEM subscriber estimates may prove too conservative.
4BAMA is offline  
 
 
Old 06-06-2006, 08:57 PM   #7
4BAMA
Rocket Scientist
 
Join Date: Feb 08, 2004
Posts: 514
4BAMA is on a distinguished road
Default

XM SATELLITE VALUATION

Sum-of-the-Parts DCF -- Retail and OEM Units Valued Separately. Figure 11
details our attempt to artificially split XM's DCF analysis between its OEM and
Retail businesses.

Retail Business: We forecast on a stand-alone basis XM's Retail business would
increase its top line at 15% 'CAGR from 2006 -- 2015 and turn free cash flow
positive in 2008. From 2008 to 2015, we estimate that stand-alone Retail free
cash flow will increase at a 27% CAGR. With relatively slower growth we assign
a more modest 1.4% terminal FCF rate. Combined with a 12.6% cost of equity the
terminal multiple for Retail sits at 9x for retail. Our Cost of Equity for XM
of 12.6% is higher than our 10.3% COE for Sirius due to a higher equity risk
premium for XM to account for the higher uncertainty regarding its business due
to recent downward revisions to forward targets, ongoing inquiries by the FTC
and FCC, and pending lawsuits. Our Sum-of-the-Parts DCF points to a Target
Price per share of $9.30 for XM's Retail business on a stand-alone basis.

OEM Business: We forecast that on a stand-alone basis XM's OEM business would
increase its top line at a 22% CAGR from 2006 -- 2015, increasing as a percent
of XM's total revenue from 41% in 2006 to an estimated 55% in 2015. Further we
forecast the OEM Business would turn FCF positive in 2008. From 2008 to 2015,
we estimate that OEM free cash flow will increase at a 38% CAGR. As such, we
see FCF generated from the OEM side of XM's business growing from 42% of total
FCF in 2008 to an estimated 56% of free cash flow in 2015. With OEM revenues
and free cash flow representing an increasing portion of XM's business and
growing at a faster clip than the retail side, we believe the OEM side warrants
a higher valuation. With stronger long term growth prospects we assign a more
robust 3.1% terminal FCF growth rate to the OEM side. Combined with a 12.6%
cost of, our OEM terminal year multiple sits at10.5x. Our Sum-of-the-Parts DCF
points to a Target Price per share of $12.31 for XM's OEM business. When added
together with Retail, this translates into a $21.61 target price, in line with
our current price target of $21.

In Figure 12 we have also made an attempt to value XM's OEM and Retail business
using different P/FCF multiples to better account for the differing growth
profiles between its OEM and Retail business.

Retail Business: We currently estimate that XM's Retail business on a stand-
alone basis would turn free cash flow positive in 2008 and then generate $0.62
in FCF/share in 2010. Further, we estimate that XM's Retail free cash flow
CAGR from 2008 -- 2013 would be nearly 33%. As such, we assign a 21x target
multiple to XM's 2010 retail FCF/share estimate, which represents a
conservative 0.6x P/FCF to growth multiple. This translates into a $13 price
target for retail in 2010. Discounting this price target back to 2007, we
arrive at a $9.13 one year forward Price Target for XM's Retail business.

OEM Business: On a stand-alone basis we estimate that XM's OEM business would
turn free cash flow positive in 2008 and then generate $0.64 in FCF/share in
2010. Further, we estimate that XM's OEM free cash flow CAGR from 2008 -- 2013
would be about 47%, above our estimated near 33% forecast for Retail. As such,
we assign a 26x target multiple for XM's OEM business, which is higher than our
21x target multiple for retail but similarly represents a 0.6x P/FCF to growth
multiple. This results in a 2010 price target for XM's OEM business of $16.73.
Discounting this back three years, we arrive at a one year forward Price Target
for XM's OEM business of $11.73. Adding our price target for XM's OEM and
Retail business yields a combined price target of $20.85.

SIRIUS SATELLITE VALUATION

Sum-of-the-Parts DCF -- Retail and OEM Units Valued Separately. Figure 13
details our attempt to artificially split SIRI's DCF analysis between its OEM
and Retail businesses.

Retail Business: We forecast on a stand-alone basis SIRI's Retail business
would increase its top line at 22% 'CAGR from 2006 -- 2015 and turn FCF
positive in 2008. From 2008 to 2015, we estimate that Retail free cash flow
will increase at a 24% CAGR. We assign a more modest than OEM 1.9% terminal
free cash flow growth rate to the Retail side of Sirius' business to account
for slower growth. Combined with a 10.3% cost of equity, our terminal year
multiple for the Retail side is 12x. Our Sum-of-the-Parts DCF points to a
Target Price per share for its Retail business of $5.42.

OEM Business: We forecast that Sirius' OEM business will increase its top line
at a 27% CAGR from 2006 --2015, increasing as a percent of Sirius' total
revenue from 27% in 2006 to an estimated 34% in 2015, and turn free cash flow
positive in 2008. From 2008 to 2015, we estimate that OEM free cash flow will
increase at a faster clip than Retail at a 38% CAGR. As such, we see free cash
flow generated from the OEM side of Sirius' business growing from 18% of total
free cash flow in 2008 to an estimated 36% of free cash flow in 2015. With OEM
revenues and free cash flow representing an increasing portion of Sirius'
business and growing at a faster clip than the retail side, we believe the OEM
side warrants a higher valuation. As such, we assign a 3.1% terminal free cash
flow growth rate to the OEM side of Sirius' business. Combined with a 10.3%
cost of equity, our terminal year multiple for OEM is 14x. Our Sum-of-the-
Parts DCF points to a Target Price per share for its OEM business of $2.01.
When added together with Retail, this translates into a $7.43 implied value for
Sirius, in line with our current price target of $7.50.
4BAMA is offline  
 
 
Old 06-07-2006, 02:28 PM   #8
plowboy1
Banned
 
Join Date: May 17, 2006
Location: MICHIGAN
Posts: 135
plowboy1 is on a distinguished road
Wink

Thank you for this fine report...It was nice of you to take the time !

Deeper Penetration is always a good thing !

PB1
plowboy1 is offline  
 
 
Old 06-07-2006, 07:46 PM   #9
loadfet17
Sirius Star
 
loadfet17's Avatar
 
Join Date: Mar 13, 2006
Location: Pennsylvania
Posts: 1,256
loadfet17 is on a distinguished road
Cool

My head hurts............
__________________
Friday and Saturday nights, I'll probably be at:

www.williamsgrove.com

or

www.newegyptspeedway.net
loadfet17 is offline  
 
 
Old 06-07-2006, 08:18 PM   #10
SIRIusStockFan
Rocket Scientist
Oem
 
SIRIusStockFan's Avatar
 
Join Date: Nov 30, 2005
Location: Virginia
Posts: 657
SIRIusStockFan will become famous soon enough
Default

Thanks for the post 4BAMA. It was a long one, but it was a good one.
__________________
SIRIusStockFan is offline  
 
 
Old 06-07-2006, 11:53 PM   #11
leviramsey
Sirius Star
 
leviramsey's Avatar
 
Join Date: May 01, 2004
Location: Springfield, MA
Posts: 1,186
leviramsey is on a distinguished road
Default

Quote:
Originally Posted by SIRIusStockFan
Thanks for the post 4BAMA. It was a long one, but it was a good one.
I've been thinking lately that XMSR's continual delaying of cash-flow and other profit-related milestones is taking its toll on their OEM relationships. I don't think Toyota, Hyundai, or Nissan want to have their brands associated with a satellite service that's not around in the future.

I think that's the prime reason Ford, especially has been slow to rollout Sirius. Mel has convinced Ford that Sirius will be around and now look at how FoMoCo is promoting Sirius (the Mazda PNPs in Canada, the ads from Mercury) and how every DCX ad it seems has a Mongo in the background, or a disclaimer saying clearly "$MAKE $MODEL shown with optional Sirius Satellite Radio". These companies want to associate themselves with Sirius, unlike not that long ago.

It wouldn't surprise me if the various OEM deals all have unilateral divorce clauses that can be exercised by the OEMs, probably requiring a cash payment to XMSR or SIRI.

If XMSR doesn't make their latest delay, or misses 8.5 million net subs at the end of the year (and Sirius makes both sub and cash-flow guidance), I wouldn't be surprised if we have a situation where SIRI offers to pay Hyundai's (hell, it's likely that the hardware in Hyundai/Kia will be dual-service... I don't think they're going to want the trouble of doing two different sets of hardware) divorce settlement as a signing bonus. Toyota would be a crown jewel (and would shift the OEM balance by itself in Sirius' favor).

Likely? Who knows. But it's a possibility, and I don't see the reverse happening. XMSR has three very noncommittal OEMs (all three were supposed to do major rollouts this fall, and their debut models [the easiest ones to do satrad for] all look to be XM-free), while Sirius' noncommittals are committing (extending OEM agreements and expanding rollouts).

Outside of GM and Honda, it appears that no OEM really believes in XMSR.
__________________
In the dog days, people look to Sirius.

Howard 99: What Came Before Howard 100!
Previous Track: The home of even-later classic rock
'90s Download: All the hits of the '90s
leviramsey is offline  
 
 
Old 06-08-2006, 04:25 PM   #12
plowboy1
Banned
 
Join Date: May 17, 2006
Location: MICHIGAN
Posts: 135
plowboy1 is on a distinguished road
Default

Quote:
Originally Posted by leviramsey
I've been thinking lately that XMSR's continual delaying of cash-flow and other profit-related milestones is taking its toll on their OEM relationships. I don't think Toyota, Hyundai, or Nissan want to have their brands associated with a satellite service that's not around in the future.

I think that's the prime reason Ford, especially has been slow to rollout Sirius. Mel has convinced Ford that Sirius will be around and now look at how FoMoCo is promoting Sirius (the Mazda PNPs in Canada, the ads from Mercury) and how every DCX ad it seems has a Mongo in the background, or a disclaimer saying clearly "$MAKE $MODEL shown with optional Sirius Satellite Radio". These companies want to associate themselves with Sirius, unlike not that long ago.

It wouldn't surprise me if the various OEM deals all have unilateral divorce clauses that can be exercised by the OEMs, probably requiring a cash payment to XMSR or SIRI.

If XMSR doesn't make their latest delay, or misses 8.5 million net subs at the end of the year (and Sirius makes both sub and cash-flow guidance), I wouldn't be surprised if we have a situation where SIRI offers to pay Hyundai's (hell, it's likely that the hardware in Hyundai/Kia will be dual-service... I don't think they're going to want the trouble of doing two different sets of hardware) divorce settlement as a signing bonus. Toyota would be a crown jewel (and would shift the OEM balance by itself in Sirius' favor).

Likely? Who knows. But it's a possibility, and I don't see the reverse happening. XMSR has three very noncommittal OEMs (all three were supposed to do major rollouts this fall, and their debut models [the easiest ones to do satrad for] all look to be XM-free), while Sirius' noncommittals are committing (extending OEM agreements and expanding rollouts).

Outside of GM and Honda, it appears that no OEM really believes in XMSR.
I think you are spot on. XMSR sank another 3.5% today. In the last six months down from 30.00 to 13.00. It's easy to see that there is a substancial loss of faith in this company, it's leaders, and it's business plan. I own a shit load of this stock and I'm certainly bad mouthing XM whenever, and where ever possible due to their mis-management. Panero you should be run out of town, on a rail.

This can't be lost on the OEM's. Mel continues to play the indusrty, and the market as the master he is.

Anyone think Howard was a bad idea now.... ? You must be living on Mars. I don't like him, and don't listen to him due to crude factor, but the man can sell service.
plowboy1 is offline  
 
 
Old 06-08-2006, 05:40 PM   #13
leviramsey
Sirius Star
 
leviramsey's Avatar
 
Join Date: May 01, 2004
Location: Springfield, MA
Posts: 1,186
leviramsey is on a distinguished road
Default

Quote:
Originally Posted by plowboy1
I think you are spot on. XMSR sank another 3.5% today. In the last six months down from 30.00 to 13.00. It's easy to see that there is a substancial loss of faith in this company, it's leaders, and it's business plan. I own a shit load of this stock and I'm certainly bad mouthing XM whenever, and where ever possible due to their mis-management. Panero you should be run out of town, on a rail.
It's actually getting to the point where I might start accumulating XMSR. I think there's support at half of Sirius' market value, because at that point you might actually see CBS make an offer for 55-60% at Sirius' market value. It will suck for those who bought in at 30 (hell, those who bought at the Q405 results at 24), but not for me, buying at 12 or 13.
__________________
In the dog days, people look to Sirius.

Howard 99: What Came Before Howard 100!
Previous Track: The home of even-later classic rock
'90s Download: All the hits of the '90s
leviramsey is offline  
 
 
 

Go Back   SIRIUS Backstage Forum > >


Digitalradiocentral.com




Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -5. The time now is 02:46 AM.
Powered by vBulletin® Version 3.8.11
Copyright ©2000 - 2020, vBulletin Solutions Inc.
Search Engine Optimisation provided by DragonByte SEO v2.0.39 (Pro) - vBulletin Mods & Addons Copyright © 2020 DragonByte Technologies Ltd.
All Content Copyright SIRIUS Backstage. All Rights Reserved. SIRIUS and registered trademarks are the property of SIRIUS Satellite Radio, Inc. The opinions posted on SIRIUS Backstage website and forums are those of the individual posters and/or this website and are not necessarily the opinions or positions of SIRIUS Satellite Radio, Inc.