Taking a Bite from SIRI's Apple Connection Enthusiasm

Citi analyst Tony Wible issued a report on SIRIUS XM Radio (SIRI) yesterday citing that availability of iPhone users to receive SIRIUS XM Radio is a positive for the equity. While I can see why the street would be enthusiastic about the development, I also see a need to maintain a level of caution.

It is one thing to have a “true” Apple (AAPL) connection, and an entirely different matter to have a connection to an application that can be used on Apple. Apple is in no way providing PUSH here. iPhone users are not seeing communication from Apple about this ability, and it is not built into the phone in the same manner that Apple's own products are.

The way I see this issue in the short term is that the initial adopters of this capability will be EXISTING SUBSCRIBERS to satellite radio that happen to have an iPhone. Because the royalties on Internet usage are greater, this capability will actually have costs associated with it, as Wible mentions. I remain cautious because the marketing of such a service has not been outlined, and I do not at this time see Apple joining in that mix. Thus, any boost because of a service such as this will have to grow organically, which is often not the quickest growth model.

I do agree with Wible in that the content offered by SIRIUS XM Radio is a key element to why the service will be a success. However, there is a note of caution here as well. Many programs on Sirius and XM’s satellite delivered service are not available on the Internet feed. It is talk and sports programming and sports events that differentiate SIRIUS XM Radio from the Pandoras and Slackers of the world, and while the Internet feed does have aspects of the talk programming, it does not have CNBC-type content or the major sporting events.

In short, having an application that works with the iPhone is great, but any benefits derived from it will not be instant, and will take time to reach the bottom line.

Position - Long SIRI, No Apple.

Comments

[kingfrogcash:]

having SIRI/XM portable improves the retention and take rate of the OEM subscription. Subscribers feel they are getting better value for their monthly fee.

2008 Aug 15 06:25 AM

[prestigeim:]

I dont have an i-phone, and I cant see how the sound quality and the battery life would hold up.

I'm long siri, and would love to see as many applications as we can........I dont see the major rev. draw from this........In the next 2-5 years could tell a whole new story.......I'm in it for the long run.

Rich
New York,NY

2008 Aug 15 06:32 AM

[Network Effect:]

Hmmm, interesting perspective. You could be right, but that's not what Sony said for monkey ball. Didn't they make $3+M in the 1st 20 days? And doesn't that go straight to the bottom line for Sony since it's a download? iPhone will be a massive profit generator for an entire ecosystem of businesses because the transaction is digital in nature and does not incur many variable costs. Sellers are flocking to the iPhone because anticipated sales and margins are off the charts. Generating sales and profits these days is hard for many businesses in this economy, and the iPhone represents a massively growing distribution network so it taps you into a huge, and growing customer base. The whole key is that this is a network that they are building, the phone, or hardware, is just the gateway; we have all seen from Ma Bell, Microsoft, eBay, PayPal, Google etc etc etc that the first to scale in this business model owns the space. With 60 million downloads in the 1st 30 days, Apple is on pace to scale significantly. And with lines out the door at Apple and AT&T stores waiting to reserve a phone 7-10 days later one month after the phone has launched, my guess is that number is growing along with the number of customers on the network. Apple will own the next generation platform, mobile commerce and social networking, because they will sell the hardware that is the gateway to the ecosystem, and the software that runs behind the network.

2008 Aug 15 06:35 AM

[gekko13:]

Tyler, the last thing we need now is for you to come along and start playing Devil's Advocate. The last couple of articles from you have had this tone. You want us to be cautious about what? Exactly what does that mean? Don't by the stock? Sell the stock? WE ALREADY HAVE THE DAMN STOCK. What will being "cautious" actually change? NOTHING. You view this Apple news as a negative. If you want to be cautious then sell your position.

2008 Aug 15 07:10 AM

[ARI D K:]

The good news for SIRI XM is that big insitutions such as Lehman Brothers, as well as phone CO like Verizon taking stock positions with Sirius XM. In the next few days we will see more and more of these kinds of actions. Hey let's face it, this is a hell of a price to load up now. IMO it will not only be Apple and the ipod, there will be other gadgets and devices I'm sure like GPS land and marine weather , sprint new sansung phone, all will start to materialize like Mel said after Labor day.

2008 Aug 15 07:17 AM

[marcopolode...:]

you can bet all your money, apple will make the jump. it is in its bets interest to own SIRI. It will well the best divice with the best content.

2008 Aug 15 07:44 AM

[killerkaul:]

I see a whiiiiiiiiiiiiiiiiiiii... and I smell poop.

2008 Aug 15 09:51 AM

[vassar:]

I think the 'talk radio' on XM and Sirius stinks. Much of it has commercials and it is bad enough watching CNBC and FOX on TV (horrendous on radio in my opinion).

Most of the NPR stuff can be obtained locally or streamed on the Internet. Lastly, podcasts, while a bit inconvenient, trump XM/Sirius in my opinion.

I have a free subscription to Sirius in two of my cars and my wife has XM (ending soon) - neither will be renewed.

2008 Aug 15 10:09 AM

[cos1000:]

killerkaul, Have you emailed Seeking Alpha about him using your pseudonym with some slight variation? He is annoying.

2008 Aug 15 10:47 AM

[can'tbeatem...:]

First the bashers used the iPhone as the thing that will kill SatRad. Now the iPhone is the thing that is going to make it jump?
It will help but seriously enough hype on the iPhone already. It's cool, it does everything well. And it is probably less than half of 1% of the total number of cell phones out there so big freakin deal

2008 Aug 15 11:07 AM

[killerkaul:]

Hey Cos...................... naaa............. I'm not interested enough to bother. Everyone knows me well enough to know that I would rather gut myself, than whine like a pablum eating baby over my lack of knowledge, homework, or preparation when investing in a stock. The eurowhiner will just fade away like the bad smell that he has become. Gotta go, will be on a motorcycle trip for nine days starting tomorrow. You guys hold the line for me till then will you? LOL

2008 Aug 15 02:02 PM

[mgv11:]

I continue to appreciate Tylers enlightening us on some of the details that get overlooked. I'd rather have his honesty on the iphone than a blip up and then sinking like rock when someone else comes on and bashes it on the over hype. The good news is we don't necessarily need to view the iphone as the enemy, maybe someday it will be just one more revenue stream that drives the company to the top.

2008 Aug 15 11:47 PM

[Mr. Billion...:]

is it possible to tap into the internet through Sirus or XM through the iphone and bypass limitations of G3 and wifi?

2008 Aug 16 10:10 PM

[Mr. Billion...:]

is it possible to tap into the internet through Sirus or XM through the iphone and bypass limitations of G3 and wifi?

2008 Aug 16 10:10 PM

[Konst:]

Mr Billionaire, the Sirius XM content will be streamed to the iPhone using a 3G or WIFI connection, not directly from the satellites, to my understanding. The iPhone will not connect directly with the satellites. Someone, correct me if I am wrong.

Question: where can I verify the claim that Verizon and Lehman brothers bough SIRI stock? Thanks

2008 Aug 17 04:12 AM

[Konst:]

bought SIRI stock?

2008 Aug 17 04:13 AM

[Konst:]

Here is the answer to my question: www.mffais.com/siri.ht...

go yahoo search, google? nah, I am kicking it old school

2008 Aug 17 04:16 AM