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Wednesday, October 25, 2006

Sirius And XM: The Beatings Will Continue Until Morale Improves

Sirius and XM took some serious pounding in the October short interest report.

The short interest in Sirius is already massive, 142.4 million shares. And, that rose 12.9 million from September. XM's number was up 3.6 million shares to 33.9 million. So, short bets on the companies rose at a rate of nearly 10% month-over-previous month.

Short interest often accumulates at companies near their highs. Microsoft's short interest rose 22.8 million shares in October to 97.4 million. But, its stock has gone from $21.50 in June to almost $29, right at its 52-week high.

Not so, Sirius. Its stock is at $3.78, a click from its 52-week low and down more than half from its 12-month high of $7.98. And, investors still want to bet it will go lower.

XM is hardly better off. At $10.16, its stock is near is one-year low of $9.63 and well down from it top of $32.

The market is clearly saying that these companies will not prosper. They may not even survive, at least in their present forms. They are under seige from better over-the-air radio and devices like the iPod. Plagued with losses and with huge amounts of debt, they are more candidates for restructuring than being operated as on-going companies. Their red ink and balance sheets are so bad that they are probably not even candidates to be taken private.

Several of the big investment banks have restruturing units. Perhaps they could give Sirius and XM a call.

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

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