missing in the discussion in recent weeks is the biggest radish on the row: with the merger completed, siri is unmistakably a monopoly. think google, think ebay, think microsoft. there is no other way to put ulimited content into a moving car with no ads. that is the core market: prosperous people riding the roads and freeways, hungry for content, hating ads and their producers every second.
so let's say 20,000,000 subs, not off by much, and it divides much more easily than 19,000,000.
let's say arpu is $10 per month. this means monthly revenue is $200,000,000 (or $2.4 billion annual). we are not off by much here either.
unknown is the expense side, but we know, for sure, that expenses are dropping per sub because the monopoly is established by the merger, and siri and xm do not need to compete with each other. this eliminates marketing expenses, duplicate content, admin., and so on. let us say it takes $1.2 billion annualy to run the business and pay the financing.
profit would be $1.2 billion at this point. assume 40% dilution of common stock after the liberty deal, and we may have about 6 billion common shares. this calculates to annual profit per share of $0.20.
the p.e. applied may be quite high, considering that siri is a monopoly. let us use 30. this is lower than other monopolies have seen.
AND VOILA! SIX DOLLARS PER COMMON SHARE.
but the pe will drift higher when the monopoly is appreciated more fully. let 's say 50.
VOILA! TEN DOLLARS PER COMMON SHARE.
and the price can be raised in two years, let us say by 50%, to bring arpu up to $15 per month.
VOILA! FIFTEEN DOLLARS PER SHARE.
and the subs will go up to 40,000,000. there are 40,000,000 literate prosperous people in the united states who will not tolerate ipod, or terrestrial radio, or their own cd disks, over, and over, and over.
VOILA! THIRTY DOLLARS PER SHARE.
doctorex has spoken.