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URL:  https://boards.fool.com/robert-i-didnt-realize-that-my-sub-estimates-16539476.aspx

Subject:  Re: On the Fool's Short Sirius advice: Date:  1/24/2002  11:25 AM
Author:  HofferFool Number:  1552 of 10889


Robert -

I didn't realize that my sub. estimates were so much below Wall Streets'. (Maybe my estimates are lower because I'm not trying to sell SIRI or XMRS shares...).

I hope XMSR is right, that it is able to sign up, retain and collect monthly payments from 350,000 people this year. I'm a fan of radio (I don't watch television) and I'm looking forward to listening in my car. I currently listen to Sirius on my computer. But I will be amazed if XMSR has over 1 million paying subs in 2005. And, if it doesn't, I don't know how it will be able to pay GM the $35 million it owes, nevermind the $400 million it will owe four years later.

Like I said, though, you can play with my model, throw different numbers in, and get wildly different results. Anyone who says they know what's going to happen with these companies is lying through their teeth. We don't know what the adoption and retention numbers will be like. That's the fun part.

The point of my post wasn't to say that either stock is a good investment or a bad investment. My point was only that if you were going to short one of the two companies, XMSR is a better choice because it is three times more expensive than SIRI and because the company is on the hook to GM for a lot of money (>$435 million), without getting much in return.

(GM isn't obligated to install any radios at all. And it could always decide that owning XMSR outright is better than getting royalties. That's scary for current shareholders).

Also, I don't think being the first mover in this field is worth as much as XMSR had to pay to be first. I think it's more likely that XM's advertising will support Sirius' rollout. And I think the deals that Sirius was able to strike with GM's competitor's are much better for Sirius shareholders than XM's deal with GM.

I've been a Fool reader and admirer for many years. I was surprised that the Fools didn't mention XM's off-balance sheet obligations. These obligations are what kept me from recommending XMSR as a speculative buy and what made me examine more closely the opportunity in SIRI.

I came to believe that SIRI has the better chance at success.

HofferFool



"We can never really be prepared for that which is wholly new. We have to adjust ourselves, and every radical adjustment is a crisis in self-esteem: we undergo a test, we have to prove ourselves. It needs inordinate self-confidence to face drastic change without inner trembling."

Eric Hoffer




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