[BC] Re: Predictions

[R J Carpenter]

> From: "Williams, Chris \(Albuquerque\)" <chrisw at clearchannel.com>
>
> XM and Sirius still haven't made a profit, how long will that work.
> My prediction is not much longer.

XM used to say that they would be in positive cash flow with about 6 
million subscribers.  They have reached the 6 million, but not the 
positive cash flow.  The Big Bucks for MLB, etc, have added costs.

Say that they are clearing $6 per month per subscriber after 
commissions, etc.  The first-year income from each subscription seems 
to be eaten up by "the cost of acquiring a customer": a subsidy for 
the radio, adverts, and other costs.

After the first year that's $72 per year. With 6 million subscribers 
that's $432 million per year. With 10 million it's $720 million per 
year.  Additional subscribers don't add much to their running costs. 
It looks to me as though profits should increase rapidly beyond the 
threshold - _IF_ they don't get into another bidding war with Sirius 
for some kind of content..

Sirius seems to me to be at least a year behind on the road to 
profits. Sirius went through a "pseudo-bankruptcy" almost 5 years ago 
when they converted their debt to stock by issuing 100 times more 
stock. That more or less wiped out the earier investors for a while.

Suppose you bought one share of XM and one of SIrius 5 years ago.

Your XM share would be worth 150% of what you payed for it. During the 
5-year span XM started at around $18/share, went as low as around 
$1.30, and is now $27.50 (222 million shares outstanding).

Your Sirius share would be worth 20% of what you paid for it - yes, a 
loss of 80%.  During the 5-year span Sirius stock started at around 
$30 a share, went to about $0.37 cents after the new shares were 
issued, and is now back to $6.30 (1.33 billion shares outstanding). 
You could have made a killing if you had faith and bought when it was 
way under a dollar a share.

Both were in the $60 to $80 region in the pre-launch euphoria.

As a comparison, if you bought General Electric stock 5 years ago you 
would have lost 33% of your investment as of last Friday.

I don't own stock in or work for either XM or Sirius.

bob carpenter