Analyst Tom Watts of Cowen issued the following report on Sirius' Q4 operating results.

Sirius Satellite Radio Outperform (1) February 26, 2008 Q4 Results: FCF Delivered. Costs Lower. 9th Qtr of Share Gains.

Conclusion: SIRI reported solid financials despite higher mail-in rebates which lowered revs. Positive FCF came in as promised, and better than expected. Subs beat XMSR for the 9th straight quarter, while retail share gained for the 29th straight month. Q4 FCF results and cost controls support our view of SIRI as anoutstanding executer. With FCF now flowing, and sustainable subscriber momentum due to OEM, we believe SIRI shares can outperform the marketsubstantially over the next year, regardless of merger approval. MaintainOutperform.

FCF Delivered, in Spades. SIRI reported $75MM in Q4 FCF, beating our $55MM, and Q4:06's $30MM. We expect SIRI to be FCF positive for FY08 before satellite launch costs (FM-5). We believe that FCF potential and visibility from OEM installs can drive outperformance even without a merger.

Solid Financials. Revs of $250MM missed our est and consensus of $269MM. Lower revs were driven primarily by higher mail-in rebates which dampened ARPU to $9.64 vs. our $10.32E and consensus of $10.30. EBITDA loss of ($107MM) vs our ($116MM)E, reflected SIRI's cost controls in Programming, Billing, and Marketing. SAC of $90 vs our and consensus of $95 boosted FCF. Churn of 2.3% matched ours exactly, and drove FY07's 2.2% vs guidance of 2.2-2.4%.

March 1st Merger Deadline to be Reviewed by Boards. Both companies' Boards will meet shortly to vote on extending the March 1 merger termination date. Given positive sentiment toward merger approval,we expect the termination date to be extended without incident.

2008 Guidance. Mgmt stated FY08 guidance would be given "following approval of the merger". We view this confidence positively

Position - Long Sirius, XM