Sirius will dodge the Stern bullet

Don't fret the potential loss of Howard Stern. Sirius will be just fine, thank you.

By Jamie Dlugosch Sep 17, 2010 3:27PM

Credit: (© Evan Agostini/AP)
Caption: Howard SternWake up Howard Stern, the world has changed.

 

Dreams of being the media king that is paid gobs of cash from overzealous media companies are a thing of the past.

 

Today, I would suggest taking what you can get.

Should you decide to leave Sirius XM (SIRI), don’t let the door hit you on the way out.

 

Your original deal with Sirius came about as a direct result of death rattle competition with rival XM. Your signing had nothing to do with being the so called king of media.

 

Your outrageous deal happened because two companies that could not afford to lose you were bidding against each other. With no choice, but to overpay you Sirius bit the bullet and over paid by a long shot.

 

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They nearly died as a result.

 

Today things are a bit different. Sirius and XM are now one and there is absolutely no reason to bid above the market rate for a mediocre and vulgar disc jockey.

 

Howard’s only threat is to return to terrestrial radio.

 

Good luck with that.

 

If you haven’t noticed terrestrial radio is dying on the vine. Ironically, your move back to terrestrial could very well be the nail in the coffin for the media company that decides to be the next player that over pays you.

 

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As for Sirius the good news just keeps coming and it has nothing to do with having individual stars in the stable. The Sirius model works because it has numerous options and niche channels for its customers.

 

Terrestrial radio has none of that. The competition between Sirius and terrestrial is not even close.

 

From an investment perspective, I have often called Sirius a must own stock. Trading now for just over a dollar per share, the potential to double or triple your money is quite real and attractive from a risk perspective.

 

How can you not love a stock of a company that is essentially a monopoly serving a market that is humongous?

 

The company continues to escape the shadows of competition with its former rival that nearly resulted in bankruptcy. On Wednesday the company reaffirmed 2010 guidance.

 

The forecast is for the company to post revenue of $2.8 billion and nearly 20 million subscribers.

 

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My own longer-term forecast is for the company to double the number of subscribers over the next three years. If so the stock will double in value or more.

 

That forecast is the same with or without Stern.

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