Buy Sirius Satellite Radio Inc. SIRI

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Buy Sirius Satellite Radio Inc. (SIRI)

• Paul Choi
• Kevin Liang
• Liya Ma
• Arjun Nagappan
• Euwyn Poon
• Joshua Schultz
• Kathleen Ting
• TJ Lansburg
• Christopher Tang

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Satellite Radio Industry

• Two players in N. America
• XM (2001)
• Sirius (2002)
• About 11 million subscribers (XM 6 mil, Sirius
  4 mil)
• Exponential growth - 1 billion in annual
  revenue

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Satellite Radio Industry

• Brink of elimination in 2002
• Sirius gave equity to creditors, XM bailed by GM
• Focus is on service quality (signal reach) and
  content
• No FCC regulation over content
• Advertising
• Distribution through aftermarket and automotive
  OEM

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Possible Merger b/w SIRI XMSR

• Credit Suisse Analyst Brian Kraft in September
  predicted a merger between Sirius and XM
• Sirius CEO publicly stated in June Wed love to
  buy XM.
• NPV of merger synergies predicted to be 12
  billion
• Benefit from economies of scale

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Opportunities

• NFL season
• 24-hour radio stream dedicated to covering the
  NFL
• NASCAR
• In 2007, will have rights to NASCAR satellites
• 75 million fans
• No FCC interference
• Without FCC interference, listeners also will
  get to hear the kind of language from NASCAR's
  drivers that has, for the most part, been banned
  and subject to fine

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Threats

• MP3 Players
• Ipods
• Ford, General Motors, Mazda
• Features in 2007 model cars
• Fords TripTunes audio system
• Does not work for all MP3 players

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Sirius Satellite Radio Inc.

• Todays Price 3.90
• Headquartered in New York, NY
• Offers 130 radio channels including 69
  commercial-free music channels and over 60
  channels of news, sports, entertainment, weather,
  etc.
• Available anywhere US including 200 miles from
  either coast of the U.S

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Sirius Satellite Radio Inc.

• Charges service packages ranging from 12.95 per
  month to 499.99 for a lifetime subscription.
• Launched Internet Radio on Monday
• Leader for radio coverage for sports.
• Oppenheimer Deutsche Bank BUY
• 12-Month Target Price 6 (current 3.90)

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Recent News

• Howard Stern King of the Media to boost sales
• Most searched talk radio personality
• Search activity increased by 1,300 in 2005 and
  128 in 2006
• Oct. 25 26 first-ever free Internet broadcast
• Loral designs and builds new Satellite
• one of the most advanced and powerful
  communication satellites ever built (complete by
  2008)
• provide unparalleled redundancy, enhanced
  coverage and exceptional performance

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Recent News (cont.)

• Possibility of Merging
• XM 7.2 million subscribers, Sirius 5.1 million
  subscribers? Karmazin (Siri CEO) may engineer a
  merger
• SIRI expected to have 6.3 million by year-end
  faster growth rate
• Sirius gets a big boost in its subscriber base
  or a big equity injection or will undergo a
  recapitalization (analysts, Forbes)

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XM Radio vs. Sirius Radio
VS.

• Ended 3rd quarter with 5.12 million subscribers
  (added 441k subscribers during that time, above
  JP Morgan Wall Street Estimates of 420k).
• Sirius has 4 satellites
• Sirius has 31 automobile investors
• Sirius has partnerships with 24 different
  networks (including ABC, CNN, ESPN, Playboy, and
  Radio Disney) NBA,NFL, NASCAR

• Ended 3rd quarter with 7.19 million subscribers
  (added 285,000 subscribers, lowest in 10Qs).
• XM has 3 satellites
• XM has two automobile investors (Honda and GM)
• Oct 11- Acura announced Certified Pre-Owned
  Vehicles would get 3 months of complimentary XM
  service
• This year XM sued by the Record Industry
  Association of America (RIAA), which claimed that
  XMs new portable devices (Inno and Helix) were
  essentially downloading devices.
• Oprah and Friends

Soruce Wikipedia
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SIRIUS vs. XM

• Market Cap. 5.38B
• EPS -0.87
• Current ratio 1.10
• Sales 185 (q. yoy)
• Beta 5.30
• Quick ratio 1.06
• High Fixed Costs

• Market Cap. 3.21B
• EPS -3.24
• Current ratio .916
• Sales 81.6 (q. yoy)
• Beta 3.35
• Large Fixed Costs
• High Fixed costs, lower than SIRI
• Cut subscription forecasts for remainder of 06

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Sirius

• Only 28 Institutional ownership
• Economies of scale has not kicked in, costs are
  an issue, hurting profitability
• Merger not built into stock price
• SIRI greater debt structure twice as leveraged
  compared to XMSR, merger would be beneficial.

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Technical Analysis
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Technical Analysis
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Recommendation Buy SIRI!

• Reasoning
• Cheap (3.90)
• Fits well into our portfolio (no over-exposure)
• Possibility of a merger
• Target Price 6
• Recent offerings

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Questions?