Gross Subscribers – A Deeper Look
One popular metric that sector followers like to track is the breakdown of Gross subscriber additions. Typically, XM Satellite Radio breaks this number down for investors, but does not break out full loaded churn. Sirius on the other hand breaks out fully loaded churn, but does not give specific numbers on retail vs. OEM on a GROSS basis.
Today, there were statements made in the Sirius conference call that can shed a little light on the Sirius breakdown:
– They stated that they beat XM in NET retail as well as GROSS retail.
– They said they beat XM on NET OEM as well as GROSS OEM
Having XM’s breakdown, and this information from Sirius, a simple mathematical equation can give us a definitive range for Sirius’ breakdown of GROSS subscribers in the retail and OEM channel.
– Sirius’ GROSS OEM Range – Between 619,000 and 678,000
– Sirius’ GROSS Retail Range – Between 324,000 and 383,000
Taking things a step further, XM indicated that NPD data, with an extrapolation for Wal Mart included, indicated that XM’s retail share was in the mid 40% range. Sirius further indicated that they maintained an above parity retail share. If we were to use 45% as XM’s share, and XM’s Gross retail number of 323,000 subscribers, then Sirius’ GROSS retail would be at 395,000 subscribers. As we can see, that falls outside of our range to the high side. If we apply a 49% share for XM, the Sirius number for Gross retail would be roughly 337,000. This falls within the range noted above and satisfies all statements thus far. Thus, we now arrive at a retail range of:
Sirius’ GROSS Retail Range – 337,135 (51%) and 380,000 (54%)
The next logical step is to try to define mid 40’s as XM stated in their call. While merely an assumption, I would classify mid 40’s as 44 through 46. This would put Sirius share between 54% and 56%. Things are now narrowing substantially:
– We demonstrated that it would be impossible for retail subscriber to go above 383,000 (SIRI retail share of 55%) and still have the statement about beating XM in GROSS OEM hold true.
– We demonstrated that giving Sirius a retail share of 55% would result in a retail number that is too high.
– We demonstrated that a reasonable assumption of “mid 40’s” is within a finite range of 44, 45, and 46.
Logically speaking this leaves us forced into no other retail percentage than 54% for Sirius. Thus, while the path to get here was long and somewhat convoluted, we can say with a certain degree of certainty that:
Sirius’ Gross OEM was roughly 622,000 (edging above XM in the OEM channel)
Sirius’ Gross retail was roughly 380,000
Position – Long Sirius, Long XM
I certainly like what you’ve done. Not everyone will appreciate the calculations because they might not understand it, but it is well done. We can see that the other analyst estimates were for the large part, way off.
Tomorrow we might get a few analysts increasing their estimates or upping their overall view on the sector or Sirius in particular, but the street is still wary of the stocks.
In my opinion however, nobody is willing to go too positive because of the risk of the merger not passing. Once the merger issue is resolved the stock or stocks will begin to trade like regular companies, where good news makes the shares increase and vice versa.
You have a stock like Apple or RIMM. They announce a good quarter, sell lots of phones, ipods or devices and the stock jumps. Sirius blows past numbers and nothing… Because we are in stock limbo… where nobody is willing to commit, with the merger overhand. I accept that this is turning into a lost year for stockholders, but once this thing blows over, really whatever way it goes, the actual numbers will start to count again, fundamentals will be taken into consideration and we will start to gain some respect from the street.
And it should come at a good time too. In 2008 we will likely start seeing great OEM ramp, and more cash flow positive quarters. We may just start to make up for lost time.