SIRIUS XM SATELLITE RADIO NEWS

Banc of America Analyst Jonathan Jacoby is no longer under the employ of the Bank. Sirius Buzz has learned that the analysts last day with Banc of America is today. Jacoby has been a common subject among satellite radio watchers. His coverage of the sector has been on the bearish side, with reports often seeming to add fuel to the fire on the negative side on any news be it good or bad.

There has been no statement issued by Banc of America and no announcement has been made as to whether the financial institution will name a new analyst to cover the sector, or simply drop coverage altogether. No news has circulated on where Jacoby might land. Those that feel positive on the satellite radio sector will likely be happy with the news. Jacoby’s last report has a price targets at the low end of analyst ranges for both Sirius and XM.

Position – Long Sirius, Long

The Drudge Report is stirring the rumor pot on the Sirius and XM merger. The information offered on Drudge is scant, but being that the site is read by many, it is sure to have a ripple effect in the sector.

“APPROVED OR DENIED? DRAMA BUILDS AROUND SIRIUS-XM MERGER… DEVELOPING…”

That’s the entire Drudge quote at this point. This will certainly develop web hits as trading starts tomorrow.

The key take away here is that yes, things could well be coming to a head on the merger. The recent filings with the FCC, and the comments made by the FCC regarding a Q1 decision coupled with most feeling that the DOJ will announce first leaves little time for things to transpire.

Sector watchers will be glued to the news wires on Monday. Will the stocks respond to these latest rumors? Only time will tell. My opinion is that the more time that passes, the more likely we are to see additional speculation on the merger.

[ DrudgeReport via Orbitcast ]

Position – Long Sirius, Long XM

Cramer finally speaks up and tells the Feds to wake the @*%$ up! Well, not literally, but he is calling for the regulators to take action. Cramer mentions in this video segment that if the government is so worried about antitrust, why did it hold only one hearing on the far bigger, far more monopolistic Exxon-Mobil merger? Or how about the Chevron-Texaco deal? He says that the politicians have their pockets filled with terrestrial radio money. As I wrote in a previous post here on Siriusbuzz, the wait for this is absolutely ridiculous. Cramer believes that this is not a monopoly at all. He discusses what we all know, the competition from various media such as IPODS, terrestrial, Internet, etcetera.

Cramer also states that the combined company would have more offerings and pricing plans that have clear benefits for the consumer, which is precisely what the FCC is looking for. Cramer predicts that if the deal is sealed, the cost savings for the combined company will be huge. Sirius, under $3 now, will likely go much, much higher and if the deal breaks apart, Jim said Sirius still works. It’s adding more subscribers and is expected to grow sales faster than its rival/partner, XM, even though it has greater operating losses. It’s also better prepared to expand outside of the players built into cars, where XM leads. Both are small and unprofitable, but Sirius’ higher sales growth makes it the clear winner to Cramer.

Check out clip from Friday’s episode of Mad Money.

You are about to embark upon the Great Merger Crusade, toward which we have striven these many months. The eyes of the financial and radio world are upon you. The hopes and prayers of radio free of commercials and FCC regulations march with you. In company with our brave listeners on other fronts, you will bring about the destruction of the terrestrial radio war machine, the elimination of NAB tyranny over the oppressed peoples of satellite radio, and freedom to yourselves in a free radio world.

Your task will not be an easy one. The NAB, FCC, and DOJ are well trained, well equipped and battle-hardened. The Axis will fight savagely…but this is the year 2008! Much has happened since Tesla, Marconi, and Alexanderson discovered the breakthrough that allowed Fessenden to transmit the human voice across a long distance in 1906. The satellite listeners have in­flicted upon the Axis great defeats, in online forums, through shareholder votes, and letters written to the FCC. Our on-line offensive has seriously reduced their strength to wage war on the ground. Our satellite radio believers have given us an overwhelming superiority in intelligence and preparedness for war, and placed at our disposal great reserves of trained fighting believers. The tide has turned! The free men of the world are marching together to Victory!

I have full confidence in shareholder’s courage, devotion to satellite radio and skill in defeating the dark side of the Axis. We will accept nothing less than full merger. Good Luck! And let us all beseech the blessing of Mel Karmizin, Howard Stern, and all those at Siriusbuzz upon this great and noble undertaking. Always remember the sacrifices of the D-Day invasion and the many soldiers who followed. These men made it possible for us to have freedoms we enjoy today.

The HD Radio Digital Alliance has taken a tact on the merger that goes against Ibiquity, and they have filed that opinion with the FCC. Ibiquity, the company behind HD Radio has not taken an official stance on the merger. Instead they are requesting that all satellite radio tuners be equipped with HD radio as a condition to the Sirius/XM merger, and that satellite radio deals with auto manufacturers be terminated. The Alliance comes out and states that they oppose the merger. Is this a rift in the HD Radio community? Only time will tell.

The Alliance starts off their letter by stating that at this point it can not be considered a competitive alternative to satellite radio

1. According to their website they already have 1,133 stations on air right now.

2. According to their website there are 1,471 stations licensed

3. According to their website they have over 3,000 stations committed, and 402 are already multicasting.

4. The Alliance touts that they are subscription free, and even has sales kits to compete directly with satellite radio.

5. HD Radio already has deals with auto manufacturers, and the Alliance website even sports new car window stickers that show HD Radio as an option in the car.

The Alliance states that there are barriers that exist because of satellite radio’s deals with auto manufacturers.

Volvo, Ford, Jaguar, Hyundai, and BMW all have deals with HD Radio.

The argument that the Alliance makes is that Sirius and XM have far more relationships with auto manufacturers than does HD Radio. The important distinctions that the Alliance leaves are are…

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Satellite Radio subscribers would be in for a treat if Vinnie Politan gets a morning drive slot.

In March of 2006 Sirius Satellite radio entered in a content relationship with Court TV to create Court TV Radio. The channel was an outstanding example of the wide array of programming that satellite radio could offer listeners. In my opinion, the highlight of the channel was the Vinnie Politan Show which aired weekdays from 6:00 am to 9:00 am. Politan was a breath of fresh air on radio airwaves, and his experience as an attorney brought a combination of real world experience and topical information to listeners across the nation.

Vinnie Politan came to Sirius through his position at Court TV. This past December Court TV went off the air and was replaced by Tru TV, a new network seeking a new direction. With the disappearance of Court TV, the Vinnie Show went off of the air. This event, while frustrating for listeners and fans, could well be a blessing in disguise, as it frees up Vinnie Politan to negotiate directly with Sirius, and would allow Sirius to market Vinnie in an entirely new direction.

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Jimmy Schaeffler of Carmel Group published an interesting article regarding the merger. Carmel Group did some initial studies on the merger, and I have in the past conversed with Mr. Schaeffler, and conducted an in depth interview based on his opinions. That article is available in the archives of Satellite Standard Group.

As with any opinion there are opposing points of view. In his article Schaeffler offers a comparison between the wine industry and the satellite radio industry and draws a conclusion that the merger is not a good thing for consumers. In summary the article offers the following example of an event in the wine industry”

The 2-Buck-Chuck Test

“‘The 2-Buck-Chuck Test’ title comes from the remarkable wine product offered by vintner Charles Shaw, who, several years ago, began competing with the significantly higher-priced wines in the national market place by, for example, selling a bottle of quality cabernet for two dollars. The move was revolutionary because not only did Shaw sell a remarkable quantity of spirits, but the competition was forced to respond (and produce more value), and the consumer was treated to a stunningly valuable offering (which the consumer loves, I can assure you from talking with my friends in the wine industry). All three parts of this consuming cycle benefited, and the economic model called basic capitalism did best what it does best: It competed head-to-head and things improved.”

From this example Mr. Schaeffler goes to this:

“Satellite radio is really just a varietal among many other choices. And the problem there is that if you allow the XM-Sirius merger, it is the equivalent of allowing Gallo to purchase the sole remaining competitive cabernet sauvignon producer, leaving just one single maker of cabernet sauvignon. I drink what Gallo gives me (and only that).

I can still go out and purchase merlot, or a zinfandel, or really a lot of other red wines. But what if I just want to purchase cabernet sauvignon – or, in our example, satellite radio – and the merger means there is now only one maker and one choice of cabernet sauvignon … or satellite radio? Is that the best way to run an economy? You pick a business and simply eliminate competition by permitting mergers and telling consumers that other, different types of products or services are adequate substitutes (even if they are not)?

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Rumors are swirling once again regarding the proposed merger of Sirius and XM. While this does add some excitement into the trading day, I would recommend that sector watchers exercise caution with regard to any merger speculation. Remember, we are dealing with government agencies here, and things in government tend to move slow. If you have ever been next in line at the Registry of Motor Vehicles, and still waited an hour only to find out you need to wait in another line, you already know what I am speaking of.

While there has been a substantial amount of time that has passed since the early December merger rumors, there has been nothing concrete to indicate that any decision is imminent. Most sources seem to tie back to Briefing.com on this latest speculation. It is interesting to note that analysts have not touched this rumor as yet, and one would think that if it was indeed concrete that reports would be crossing the wires already.

Perhaps the best strategy for investors is to continue with your strategy prior to all of the speculation that existed today. in point of fact, the likelihood of the merger passing remains the same today as it did yesterday prior to the swirling rumors. personally I believe that the DOJ will indeed act first, and that they were likely close to some action when analysts Peck and Cowen published reports late in Q4. Those reports generated so much press that it probably became politically impossible for the decision to be announced, and thus a longer wait happened.

Use caution with regard to the merger, but keep your eye on the news.

Position – Long Sirius, XM