Lucas Binder of UBS has released a note on satellite radio. The analyst is neutral on Sirius as well as XM, and has taken his price targets down.

REPORT EXCERPTS

Expect Weak Retail to Have Longer Tail Impact

Lower subscriber outlook negatively impacts valuation
We have lowered our price targets for both SIRI and XM to $3.00 and $12.00 from $3.90 and $16.00, respectively. We have reduced our subscriber growth estimates for both SIRI and XMSR to reflect weaker retail growth in the industry. We expect OEM penetration to drive industry growth, however, we do not expect it to be enough to drive y/y growth in net adds in the foreseeable future.

Merger outlook still key focus for investors
According to press reports, the FCC Chairman, Kevin Martin, stated that he hopes that the SIRI/XMSR merger is ruled on by the end of 1Q08. He also said that theFCC has not finished its review of the merger and that the commission has follow-up questions for the companies. The FCC does not expect to reach a decision on the merger before the Department of Justice announces its ruling. We remain 50/50 on the likelihood of a deal going through.

Valuation: Reduce price target to $3.00 and $12.00 for SIRI and XMSR We base our price targets on a detailed DCF analysis. In both cases we use a 3.0% growth in perpetuity and a 13.0% WACC

Sirius Satellite Radio, Neutral, $3.00 Target

Lowered price target due to reduced subscriber growthWe are lowering our price target on SIRI to $3.00 from $3.90. We expect weakness in retail subscriber growth to have a long-tail impact on our estimates, which leads to a lower subscriber outlook. However, OEM penetration increases should continue to drive non-retail sub growth.

4Q07 outlook
We expect SIRI to report 4Q07 revenues of $265.4M, up 9.8% from 3Q07 and 37.3% from 4Q06. We forecast EBITDA, excluding non-cash stock compensation, to be a loss of $(123.7M), an improvement of 25.9% from 4Q06. We expect an EPS loss of $(0.13), a 25.7% improvement from 4Q06 and SAC to be $93, a 10% improvement from both 3Q07 and 4Q06.

Valuation: Neutral rating with a 3.00 price targetWe base our price target on a detailed DCF analysis, using 3.0% growth inperpetuity and a 13.0% WACC

XM Satellite Radio, Neutral, $12.00 Target

Lowering price target on lower retail sub outlook
We are lowering our price target on XMSR to $12.00 from $16.00 following SIRI’s4Q07 subscriber results. We believe SIRI’s weak retail growth in the traditionally strong 4Q period likely had a negative impact on XMSR’s results. As such, we are lowering our 4Q07 and forward subscriber and top-line estimates, accordingly.

4Q07 outlook
We expect XM to report 4Q07 revenues of $299.1M, up 4.0% from 3Q07 and 16.3% from 4Q06. We forecast EBITDA, excluding non-cash stock compensation,to be a loss of $(72.2M), a 3.4% drop from 4Q06. We expect an EPS loss of $(0.56),a 37.6% improvement from 4Q06 and SAC to be $83, up 18.6% from both 3Q07and 4Q06.

Valuation: Neutral rating with a 12.00 price target We base our price target on a detailed DCF analysis, using 3.0% growth inperpetuity and a 13.0% WACC

Tyler Savery Position - Long Sirius, Long XM