XM Satellite Radio (XMSR)

Notes:
- 1.5 M subscribers as of Feb 2004, from 1.3M in Dec 31 2003, and 350K in Dec 31 2002
- Estimated 2.8 M subscribers by the end of 2004
- What's the vehicle vs. non-vehicle subscription base-
- GM is an 8% owner, and XMSR has an exclusive (until 2013) factory installation deal with them
- Installed in 20,000 Avis rental cars
- How much does installation cost- XM-Roady by Delphi is $120 online (http://www.xm-radio-satellite.com/index.asp-PageAction=VIEWCATS&Category=289)
- How much is subscription- $9.99 a month (Playboy radio is $2.99 extra a month). Multiyear discounts are available.
- Have 2 satellites in orbit now. Launching a third in late 2004 and a forth in 2007. How much does each launch cost-
- 10-K claims to have enough money to cover operations without further financing
- Deal with Jetblue and AirTrans offering inflight service starting Fall 2004. How much will XMSR get- No money apparently, just free advertising

SWOT Analysis:
- Strengths
+ Growth is impressive. Will be at least 96% YOY in 2004
+ Sirius holds the only other US Satellite Radio license.
+ Economies of Scale. Only cost is of acquiring subscriber

- Weaknesses
+ They need to grow their subscriber base to at least 8.5 M before they become profitable (given fixed costs)
+ Is it really that compelling a service- Would you pay $10 / mo. for radio-

- Opportunities
+ They can get creative about services (e.g. weather service, traffic, etc.)

- Threats
+ Outstanding claim to their insurers that solar arrays on satellites are degrading faster than expected. Insurers are rejecting those claims.

Bottom line:
There is significant downside to this industry and to this company. It is a tough fight to get to even a breakeven point. They are a long way away, and don't have too much time to get there.

Recommend: Stay away.