Many of the comment posters and forum posters out there have mentioned that Mel Karmazin sounded frustrated and angry at the Merrill Lynch Media conference. I have been busy at work, and had not had a chance to listen to it until now, and I must say that I was surprised by what I heard, because to me, it was nothing at all what I expected after hearing your comments. I am not saying that I thought the speech was good by any means, but I did catch a few bright spots.

Let’s take a look at some historical numbers.

In second half of 2005, Sirius XM combined for 3,007,401 net adds. In second half of 2006, they combined for 2,073,795. In second half of 2007, they combined for 1,937,247. In this conference call, Mel stated that they planned on finishing 2008 with 19.5 million subs. Taking the combined numbers from the Q2 2008 conference call (18.6 million subs), this would mean that Sirius XM plan to add only 900,000 subs for the half. The two companies surpassed this number in Q4 2007 alone while dealing with all of the merger confusion. While the numbers may drop, I seriously doubt they will be dropping 50% year over year.

Mel follows that statement with the statement “We calculate that if we just add 2 million subs in 2009, we will finish the year with 21.5 million subscribers.” I’ve already pointed out why I think their 1 million net adds in the second half is severely low-balled, so lets look at full year numbers. In 2005, Sirius XM combined for 4.8 million adds, another 4.4 million in 2006, and 3.7 million in 2008. Again, I do not expect the net subscriber adds to drop by nearly 50% year over year.

Mel also stated that the GM contract comes due in the year 2013, but stated that most OEM deals are negotiated well before that time, due to the roll-out required, and he mentioned a 3 year time frame. That would mean that if they have not already started, they will start talking to GM about their contract either late 2008 or early 2009. Assuming that GM will take a smaller cut of Rev Share to become more in-line with the rest of the OEM deals, the savings will go straight to the bottom line.

Just remember, every cloud has a silver lining. I am not attempting to pump this stock, as I see several problems that Sirius XM will have to face in the coming months, but if you look into the numbers and the history, you can definitely see the inconsistencies that will lead to upside surprises.

The biggest problem I had, however, is Mel Karmazin saying “We are being very conservative here.”

Yes, that is Mel’s M.O.: Under Promise, and Over Deliver. The problem that I have with Mel following his true form here is that a lot of the banks that are going to be looking at refinancing their 300 million dollar convert, or extending the revolving credit of XM, are looking at these numbers. If they see a company that is no longer the growth stock that it once was, they are going to turn Mel down or charge much higher rates. I don’t like it Mel. Even if you over deliver for YE 2008, it is still too late to make a good deal on financing.

Position: Long SIRI, No position GM