Broken Signals from XM and Sirius Satellite Radio (XMSR, SIRI)

| About: Sirius XM (SIRI)

Don't expect to get paid by satellite radio giant stocks XM Satellite Radio (XMSR) and Sirius Satellite Radio (NASDAQ:SIRI) anytime soon.

It doesn't take a genuis to see how those companies do a lot in the way of engorging over-rated icons with fat contracts but little when it comes to increasing shareholder value.

XM shares tumbled 27% last year, compared with the Nasdaq's miniscule 1% climb. And 2006 isn't looking much better: Already, the stock is down 10%, and that's after the Oprah pop last week. Sirius shares aren't faring any better either: After falling 12% in 2005, they've dropped another 16% year-to-date.

XM announced last week that it signed Oprah Winfrey to a $55 million, three-year deal for an "Oprah & Friends" channel.

Oprah's brand is a cultural force not to be reckoned with, and although we think both of these stocks are dead money for at least another 3-4 quarters, XM looks like the better buy. From SmartMoney:

It should only take 145,000 new subscribers for XM to break even on it, according to the number crunchers at Oppenheimer. That's a fraction of the estimated one million additional customers that Sirius needs to break even on its deal with Stern. And when it comes to promotional force, no one's stronger than Oprah. Or smarter, I should add, considering her deal was all cash, not stock.

Looks like these companies are taking a page out of the Overstock (NASDAQ:OSTK) playbook -- get bigger by losing more.

Analysts expect XM to lose 92 cents a share for its fourth quarter, 20 cents worse than a year ago, according to Reuters. And Sirius is expected to lose 22 cents a share, a penny worse than last year, according to estimates.

Both XM and Sirius expect to turn cash-flow break-even by the end of 2006. Who cares?

With those bloated pay packages already doled out to Oprah and Howard, investors will want genuine earnings.

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