Motley Fools: Stock Madness 2005: Sirius vs. XM
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Motley Fools: Stock Madness 2005: Sirius vs. XM
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Stock Madness 2005: Sirius vs. XM
By Tim Beyers (TMFMileHigh) and Rick Aristotle Munarriz (TMF Edible)
March 17, 2005
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.
$5.23
52-week low-high $2.01-$9.43
$6.61 billion market cap
By Tim Beyers (TMFMileHigh)
Let's start with the facts: XM Satellite Radio pioneered the market. It has triple the subscribers of rival Sirius. And the company is doing wonders with technology. (Indeed, apparently XM can turn a toaster into a radio.)
OK, but so what?
If this battle were really about technology, then, yeah, XM probably would win. And just because XM was first to market doesn't mean it will remain as the leader. Do you think Motley Fool Stock Advisor pick Dell (Nasdasq: DELL) was even a blip on the radar screen of IBM (NYSE: IBM) in the '80s? Not a chance. But we all know how the latecomer did.
I won't argue the numbers here because they all favor XM, and that's fine. The debate here is over which company is better geared to give subscribers what they really want in terms of programming. Take a look at the management of both companies for the answer. XM is loaded with former telco guys who know how to build a delivery network. Atop Sirius is Mel Karmazin, who helped turn Viacom (NYSE: VIA) into a media powerhouse. 'Nuff said, right?
Yeah, but I've got more space, so here's one final parting shot. Normally, I wouldn't quote another analyst in a forum like this. But I'll waive that exception here because this Take so clearly expresses why Sirius ought to get your vote. So, here's Kit Spring, an analyst who closely tracks satellite radio for Denver securities firm Stifel, Nicolaus: "Sirius has Howard Stern and the NFL, and we think that trumps XM's MLB and Opie & Anthony." Exactly. Vote Sirius.
Fool contributor Tim Beyers didn't own shares in any of the companies mentioned at the time of publication, but he did listen to Sirius' classical selections while he was writing this entry. You can find out what is in Tim's portfolio by checking his Fool profile.
XM Satellite Radio (Nasdaq: XMSR)
Washington, D.C.
$28.99
52-week low-high $20.35-$40.89
$6.2 billion market cap
By Rick Aristotle Munarriz (TMF Edible)
With 3.2 million people subscribing to its digital radio service, XM is nearly three times larger than its only other satellite-radio rival. Traditional terrestrial radio can't compete with its offerings of 150 digital channels that include nearly 70 commercial-free music stations to go along with dozens of talk, sports, news, and entertainment options. Twenty channels provide traffic and weather reports.
XM is looking to have 20 million paying subscribers by 2010. Such a goal would normally be considered ambitious, but this company has been able to surpass every single subscriber target it has publicly set so far.
Business is booming, in every sense of the word. Things are going so well that the company is in the process of raising its monthly fee by 30%. Yet $12.95 a month is still a bargain compared with cable- and satellite-television subscriptions.
The company has friends in all the right places: General Motors (NYSE: GM) has a million new car buyers that have opted to have XM as a factory-installed option, and other carmakers, such as Nissan and Toyota, are also on board. XM has also been marketing aggressively through consumer-electronics superstores.
No, XM is not profitable right now, but this is a truly scalable business. With three satellites up in orbit, XM knows that every subscriber is more lucrative than the one before, and that's why the quest to land the ears of 20 million subscribers -- which is really just 10% of the radio listening market -- is so compelling. The company grew revenue by 166% to hit $244.4 million in 2004. And the top-line growth should continue to be explosive as listeners migrate to the superior platform of satellite radio and as the company finds new ways to maximize its revenue given its captive audience.
Fool contributor Rick Munarriz is a satellite-radio fan and subscriber -- but he does not own shares in any of the companies mentioned in this tournament match.
Rebuttals
Rick, you're still one of my fave Fools, but you're way off on this one. I mean, really, I don't want to call you a flip-flopper, but wasn't it you who said Sirius was a Rule Breaker? XM has gotten a free ride pining for subscribers by discounting its service. But those days are over. Now it will have to compete on content. Howard Stern vs. Opie and Anthony? Get Sirius. -- T.B.
Tim started with the facts. I'll end with them. Sirius has 1.3 billion shares outstanding. That means, on a market cap basis, that it is more expensive than XM. There is no reason why Sirius should be worth more than XM these days. XM is three times larger, and unless Kit Spring has 3.2 million friends migrating to Sirius next week, you stick with the leader until proven otherwise. The mob rules. -- R.A.M.
Who won? Click here to cast your vote. http://boards.fool.com/Message.asp?mid=22209386
The Motley Fool is investors writing for investors.
Please deliver my report to: Motley Fool Guarantee
--------------------------------------------------------------------------------
Email this page Format for printing Reuse/Reprint
Stock Madness 2005: Sirius vs. XM
By Tim Beyers (TMFMileHigh) and Rick Aristotle Munarriz (TMF Edible)
March 17, 2005
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.
$5.23
52-week low-high $2.01-$9.43
$6.61 billion market cap
By Tim Beyers (TMFMileHigh)
Let's start with the facts: XM Satellite Radio pioneered the market. It has triple the subscribers of rival Sirius. And the company is doing wonders with technology. (Indeed, apparently XM can turn a toaster into a radio.)
OK, but so what?
If this battle were really about technology, then, yeah, XM probably would win. And just because XM was first to market doesn't mean it will remain as the leader. Do you think Motley Fool Stock Advisor pick Dell (Nasdasq: DELL) was even a blip on the radar screen of IBM (NYSE: IBM) in the '80s? Not a chance. But we all know how the latecomer did.
I won't argue the numbers here because they all favor XM, and that's fine. The debate here is over which company is better geared to give subscribers what they really want in terms of programming. Take a look at the management of both companies for the answer. XM is loaded with former telco guys who know how to build a delivery network. Atop Sirius is Mel Karmazin, who helped turn Viacom (NYSE: VIA) into a media powerhouse. 'Nuff said, right?
Yeah, but I've got more space, so here's one final parting shot. Normally, I wouldn't quote another analyst in a forum like this. But I'll waive that exception here because this Take so clearly expresses why Sirius ought to get your vote. So, here's Kit Spring, an analyst who closely tracks satellite radio for Denver securities firm Stifel, Nicolaus: "Sirius has Howard Stern and the NFL, and we think that trumps XM's MLB and Opie & Anthony." Exactly. Vote Sirius.
Fool contributor Tim Beyers didn't own shares in any of the companies mentioned at the time of publication, but he did listen to Sirius' classical selections while he was writing this entry. You can find out what is in Tim's portfolio by checking his Fool profile.
XM Satellite Radio (Nasdaq: XMSR)
Washington, D.C.
$28.99
52-week low-high $20.35-$40.89
$6.2 billion market cap
By Rick Aristotle Munarriz (TMF Edible)
With 3.2 million people subscribing to its digital radio service, XM is nearly three times larger than its only other satellite-radio rival. Traditional terrestrial radio can't compete with its offerings of 150 digital channels that include nearly 70 commercial-free music stations to go along with dozens of talk, sports, news, and entertainment options. Twenty channels provide traffic and weather reports.
XM is looking to have 20 million paying subscribers by 2010. Such a goal would normally be considered ambitious, but this company has been able to surpass every single subscriber target it has publicly set so far.
Business is booming, in every sense of the word. Things are going so well that the company is in the process of raising its monthly fee by 30%. Yet $12.95 a month is still a bargain compared with cable- and satellite-television subscriptions.
The company has friends in all the right places: General Motors (NYSE: GM) has a million new car buyers that have opted to have XM as a factory-installed option, and other carmakers, such as Nissan and Toyota, are also on board. XM has also been marketing aggressively through consumer-electronics superstores.
No, XM is not profitable right now, but this is a truly scalable business. With three satellites up in orbit, XM knows that every subscriber is more lucrative than the one before, and that's why the quest to land the ears of 20 million subscribers -- which is really just 10% of the radio listening market -- is so compelling. The company grew revenue by 166% to hit $244.4 million in 2004. And the top-line growth should continue to be explosive as listeners migrate to the superior platform of satellite radio and as the company finds new ways to maximize its revenue given its captive audience.
Fool contributor Rick Munarriz is a satellite-radio fan and subscriber -- but he does not own shares in any of the companies mentioned in this tournament match.
Rebuttals
Rick, you're still one of my fave Fools, but you're way off on this one. I mean, really, I don't want to call you a flip-flopper, but wasn't it you who said Sirius was a Rule Breaker? XM has gotten a free ride pining for subscribers by discounting its service. But those days are over. Now it will have to compete on content. Howard Stern vs. Opie and Anthony? Get Sirius. -- T.B.
Tim started with the facts. I'll end with them. Sirius has 1.3 billion shares outstanding. That means, on a market cap basis, that it is more expensive than XM. There is no reason why Sirius should be worth more than XM these days. XM is three times larger, and unless Kit Spring has 3.2 million friends migrating to Sirius next week, you stick with the leader until proven otherwise. The mob rules. -- R.A.M.
Who won? Click here to cast your vote. http://boards.fool.com/Message.asp?mid=22209386
The Motley Fool is investors writing for investors.
Please deliver my report to: Motley Fool Guarantee
--------------------------------------------------------------------------------
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