USAToday - negative on satellite radio stocks

Thursday, August 31, 2006

Krantz writes: "When individual investors get overly enthusiastic about unproven, unprofitable small companies, there's usually an unhappy ending.

That's precisely what's happened to investors in satellite radio. After the dot-com bubble burst, investors looking for fast money scrambled into these stocks and were richly rewarded for a while. Hardly a day passed without readers asking me about the stocks."

...followed by...

"My views have essentially remained the same. Since that column ran, XM and Sirius
have both posted four more quarters of losses totaling $586.6 million and $813.5 million respectively. Yes, revenue has gained as well, but both companies continue to burn cash."

I don't understand why people listen to columists like Krantz and Cramer...this is really superficial analysis. The only numbers that you should pay attention to with SIRIUS and XM are: customer acquisition cost and lifetime value of the customer (which you can calculate by multiplying the annual subscription fee by the reciprocal of churn, which both companies report).

I bet this guy was negative on cable stocks in the 80s...


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