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Monday, October 23, 2006

Sales Slow At Sirius And XM With No Solution In Sight

Stocks: (AAPL)(XMSR)(SIRI)

According to an analyst report out of Banc of America Securities, retail sales for the two satellite radio companies fell 12% in September.

B of A also said that its survey of retailers indicated that these retail figures could continue into the 4th quarter in the face of more demand for iPods. The report also said the XM has a better chance of doing well in the future because it depends less on the Big 3 automakers.

Investors in the two satellite radio companies have been hoping against hope that share prices will recover and that competition from digital radio and iPods will not drag on the increase in subscriptions that made XMSR and SIRI darlings of Wall St. just a couple of years ago.

After trading almost $8 in December, Sirius now gets $3.95 on a good day. XMSR trades at about $11, down from $34 a little over a year ago. While over the last year, SIRI has outperformed XMSR that has changed. For the last 90 days both stocks are off an identical 5%. And, since the beginning of the year, the S&P has thrashed both stocks handily.

It is beginning to dawn on investors that XM and Sirius may simply be average companies that may do OK but are in a business that is too pedestrian to bring big returns. Satellite radio may be, in a word, “average”. These companies are not Google or Apple, as some believed they would be when there stocks were skyrocketing. From late 2002 to late 2004, XM’s stock ran from $1.84 to $40.20. At least its 52-week low is only $10.80.

XM now has 7.2 million subscribers. Sirius has 5.1 million. It says it can hit 6.3 million by the end of the year. Apple sold 8.7 million iPods last quarter.

Who has the better business?

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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