Well, some investors may look at today's declines as an opportunity to get into the stocks. I wouldn't. It may be worth nothing that while both radio companies are valued nearly always similarly, many favor Sirius, saying it can only come out a winner regardless of how the dice rolls on the proposed merger of the two. Should the merger go through, all the better; if it doesn't, then Sirius is the faster growing and the better positioned one of the two.
As for the merger, only yesterday Wisconsin's attorney general, J.B. Van Hollen, asked the U.S. Justice Department to block the $4.3 billion merger. He was quoted as saying that "the proposed merger would eliminate competition in the satellite radio industry and the combined XM-Sirius companies would be free to raise prices, stifle innovation and reduce program diversity." Nothing really radical or new in his arguments, nothing Sirius CEO Karmazin hasn't heard before, nothing the companies haven't addressed (or tried to address) already. Karmazin claims satellite radio "competes with terrestrial radio and the iPod" and offers a-la-carte pricing to address the other concerns.
If the merger goes through, investors most definitely will not want to be short the two stocks, but that is a big IF, one that is difficult for me to put my faith in. For now, I wouldn't want to be long the stocks either. As far as I'm concerned, the recent earnings reports showed more potential problems without much innovation, although in that department Sirius definitely has the upper hand with its upcoming backseat TV offering Disney, Nickelodeon, and Cartoon Network beginning in the fourth quarter.
Bottom line is the two are money-losing risky plays at best -- XM even more so than Sirius. The only thing going for XM is the merger and if that doesn't happen ... you know the rest. Sirius also remains a risky play, definitely more risky than other opportunities out there. The stocks have been uninspiring to say the least over the last 52-weeks. If I look at satellite radio's so called competitors -- according to Karmazin that is -- over the same time period I see far better returns from CBS (NYSE: CBS), Clear Channel (NYSE: CCU) and Apple (NASDAQ: AAPL). Is the potential reward really that much greater to justify such a higher risk? I don't think so. Why, then, should I buy satellite? Why should anyone?
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Reader Comments (Page 1 of 1)
9-19-2007 @ 9:58PM
Richard Olson said...
I purchased Sirius stock when shock jock Howard Stern singed a contract to join the satellite network. Everyone thought the stock would soar when in reality it nose dived into the crapper. I truly believe it was all a ploy between Howard and Sirius to sell shares although he did sign a multi million dollar contract his followers took a hit at his expense and he is laughing all the way to the bank as usual. Well I hope he ends up in the crapper along with his stock They belong there together. Now the new gimmick is Sirius and XM joining hands in slimily financial wedlock. Again trying to coax hard working people to again invest in their stock and further line the pockets of Stern and the likes of him. Well I hope the feds block the transaction and drive Stern and Sirius onto the unemployment line..
9-22-2007 @ 9:45PM
Kevin said...
Richard- Can I get you a tissue? You lost money on a stock- big deal. What makes you quailfied to pick stocks anyway? I imagine that you are no longer a stockholder so why do you care if the merger goes through or not? Lick your wounds and move on. Actually give me my tissues back- I should give them to someone who deserves them.
9-19-2007 @ 11:52PM
Ladmo said...
Wow,...way to go Kevin,..most excellent. You took the words right outta My font bro.
As for you Dick Olson,...you certainly are a douche. :~)
9-20-2007 @ 1:56AM
Fred said...
Does anyone realize that Wisconsin's Attorney General, J.B. Van Hollen, (quoted in the article asking the Justice Dept. to block the merger), is a major owner and/or shareholder in a terrestrial broadcast station in Wisconsin?? Isn't this a major conflict of interest?? Just wondering.
9-20-2007 @ 12:13PM
Harv Treat said...
The UBS ANALyst surely has ulterior motives. How in the world can you downgrade a stock and raise the target price at the same time? I believe that most ANALysts are only concerned about getting their clients in at a good entry point or getting them out at a high point and that is why they upgrade and downgrade stocks. They need their client s to sell or buy so they can make their commissions!
Harv Treat
9-20-2007 @ 12:11PM
Richard Varsalona said...
Hey Melly: how can you compare sat radio which is still in it's infancy stage to apple;nbc,etc.I,ll bet anything you thought pay TV was a loser also.How many new industries do you know that are involved with heavy upfront development costs show profits in their early years?
9-20-2007 @ 1:00PM
melly said...
Hey Richard, I'm not the one making these comparisons. Karmazin is. Sure in a different way but it doesn't matter, these opportunities for investors exist out there, why not choose them then?
And you're right regarding profitability, but so far few promises have been kept and I just can't see the reward being compelling enough for the amount of doubt surrounding these two.
9-24-2007 @ 7:12PM
Nathan said...
I am starting to lean towards the opinion that a merger is absolutely necessary for the survival of these two companies. I hardly knew about satellite radio until I found this page and read more..
satellitesweeper.com/satellite-radio.htm
9-24-2007 @ 7:13PM
Nathan said...
I am starting to lean towards the opinion that a merger is absolutely necessary for the survival of these two companies. I hardly knew about satellite radio until I found this page and read more..
http://www.satellitesweeper.com/satellite-radio.htm