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As Sirius XM Radio's (SIRI) much-anticipated earnings release draws near, investors will focus on several factors that color the satellite radio company's business, ranging from subscriber metrics to how it manages its balance sheet, particularly its debt load. While I consider these components of the report important, I think investors could do just fine looking past them, focusing instead on exactly what Sirius XM's SatRad 2.0 will bring to the table. For long-term investors, SatRad 2.0 developments will help inform the debate over how Sirius intends to evolve in a space with increasing and formidable competition.

On Thursday, Howard Stern announced to the world -- or at least his legion of satellite radio listeners -- that he would begin working three- to four-day work weeks. Typical and classic Stern: "I figured it was better if we showed up three days a week, sometimes four days a week or whatever, be here for you, touch base and do a good show." If we showed up. Touch base. Whatever. As if he could care less, right?

But we know the real story. Stern needs radio. He said as much in the recent and fantastic interview he gave Rolling Stone. For Stern, radio represents a psychological necessity. Inversely, Karmazin probably has more short-term headaches brought on by paying the price to keep Stern around, but he needs him, for the time being, from a business standpoint.

Many of the Stern fans I know despise the "Best of" shows the network runs in place of live Stern shows. It's akin to hearing another Springsteen bootleg from 1978 on E Street Radio. You can only go so far pleasing the obsessed diehards. I believe Karmazin agreed to a new deal with Stern -- one that Stern clearly made out on -- because of what Stern represents more than because of what he actually does. Don't get me wrong, Stern is a great talent, but Sirius has tons of other programming that allows it to command monthly dues from 20 million or so subscribers.

At this point, Karmazin probably needs to concentrate as much, if not more, on pleasing analysts and investors as he does subscribers. For now, Stern serves as the face of Sirius. If he leaves, it's no different than Wayne Gretzky leaving Edmonton for Los Angeles or Babe Ruth heading to New York from Boston. Regardless of a franchise's other merits, when a big star defects, the brand, the image, the public's perception of it takes a hit. Because 2011, could prove to be a make it or break it year for Sirius XM, Karmazin absolutely could not afford the marketing and PR nightmare letting Howard Stern go would have triggered. I don't think he could have even afforded the question marks had he signed Stern to a much shorter deal. Heading into next week's earnings report, we would be wondering if SIRI could hold $1.50 (or less) rather $2.00 had Stern left.

Starting with Tuesday's earnings report, Karmazin needs to begin not just outlining, but executing his vision as Sirius XM prepares to enter a long-term future without Howard Stern. Just like Wall Street appears to demand seemingly impossible proof that Apple (AAPL) can be Apple without Steve Jobs, Karmazin must make a better case that Sirius is relevant without Stern or any other big name talent or contract it might lose going forward. To this end, I think SatRad 2.0 is key.

SatRad 2.0 can no longer be the first round draft pick we hope to develop. It has to become, sooner rather than later, the first rounder who is ready to play now. I am not sure that Sirius needs the equivalent of the next Gretzky or iPod, but it needs to convince investors that it is a big enough development to render isolated pieces of its lineup irrelevant.

I have received several emails and comments this week from investors asking me how to play SIRI going into earnings. Some of these folks have relatively large stakes in the company. Not all have owned their shares since they were worth pennies apiece. While some options' strategies can present relatively low risk/high reward scenarios, I think SIRI longs as well as those thinking about getting in can wait until after the earnings announcement to make their move.

I would listen long and hard for concrete details about SatRad 2.0. When will it be released? Exactly what will it do? And, more importantly, how do you plan on telling the world about it? Again, happy subscribers will likely go ga ga over whatever SatRad 2.0 ends up being, but that matters little to the stock. It needs to be a game-changer. It not only needs to have social cache and mass appeal power, but it needs to give people a reason to choose Sirius over the growing number of options in mobile (as in, in your car and your phone) and Internet-based entertainment. Speculation about what it will be is great, but investors tend to respond best to certainty.

If Karmazin manages to blow people away not only with subscriber metrics and revenue numbers on Tuesday, but with fresh and firm SatRad 2.0 details, the stock will run. If the innovation looks to be a true gamechanger, I think SIRI has a ways to run. In fact, I don't think you would be chasing the stock higher up in the $2.00 range. SatRad 2.0 could make SIRI a double-digit stock in less than five years.

If, however, SatRad 2.0 amounts to nothing more than GPS, a DVR for audio, and Pandora all rolled into one, longs likely won't get burnt assuming subscribers, revenue numbers, and any guidance come in strong. I would at least assess taking some profits if that's the only good news. I would not go long merely on a good quarter without confirmation that SatRad 2.0 will be the real deal today, not sometime tomorrow. Better places will then exist to park your cash.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: Author may open long or short positions in SIRI or AAPL, possibly via options, at any time.

Source: SatRad 2.0 Might Make or Break Sirius XM in 2011