Focus Media (FMCN), the People's Republic of China 's [PRC] largest digital media company, posted Q208 revenues of $211.7M, up 106.8% from the same period in 2007 and net income of $36M down slightly from 2007 due to acquisition related charges. In addition to the robust revenue and net income results, the company reported a healthy net cash position of nearly $362M at the end of the quarter.

With results like these, and a future that seems as bright as one of those digital billboards on a Beijing skyscraper, one would expect the company to be trading at or near its projected 2008 revenue growth rate. So why is the company trading at a significant discount?

Shares of China Digital TV (STV) continued their uninterrupted nose dive to the single digits last night after management issued weak Q308 revenue growth guidance of just 8-15%. This compares to the 74.2% revenue growth the company posted for Q208.

Management sited the May earthquake and Beijing Olympic Games as the primary reasons why cable operators were delaying purchasing the company's smart cards.

By now we've all grown accustomed to the act of congressional "ambulance chasing"; members of Congress who regularly appear on the scene every time there is a problem, pointing fingers at the other party or involved government agency, proclaiming their own innocence to the situation and out of the blue presenting a miraculous solution to the problem. Narcissists by nature, members of Congress use these situations to garner TV time and press coverage, giving their constituents the impression they are not part of the problem and that instead they are working hard on their behalf to make everything right.

Over the years, NY Senator Charles Schumer has become known for just this type of activity. Whether it's the energy crisis, the banking crisis or anything else that is capturing national headlines at the moment, you can rely on Senator Schumer to pop up in the media to point fingers, separate himself from the situation and present a litany of bureaucratic solutions for resolving the issue.

Something’s very wrong with China Digital TV (STV).  No, not for the obvious reason that the company’s shares have declined 80% from their all time high of $55.31 set in October, or that they have fallen over 45% since reporting better than expected earnings on 5/14/08.  

What’s most concerning is the 32% decline that has occurred over the past two weeks for no apparent reason.  Adding intrigue to the equation is that the majority of the recent sell off came during the past four trading sessions on significantly heavier than normal volume.  Sessions that normally experience light trading volume do the July 4^th holiday. 

Shares of Sirius (SIRI) and XM Satellite Radio (XMSR)have fallen over 30% since the reiteration of sell ratings and lowering of price targets for both companies by Goldman Sachs last week. 

With the sell off, the combined market capitalization of the companies now stands at just over $5.1B, levels not seen since Q4 of 2003.

As of the latest short selling report, the number of Focus Media (FMCN) shares sold short stands at over 21M or more than 16% of the company's total outstanding shares. 

Short sellers have capitalized beautifully on what has amounted to a perfect storm for the company’s share price.  The first tempest came in the form of a massive sell off in shares of China based companies that began late last year and continues to this day.  The second came in Q1 as a result of the company being forced to discontinue their mobile advertising business after it was determined to be sending what amounted to spam SMS messages to millions of Chinese citizens.  Then there was the Tibet uprising, the earthquake, rising food and gasoline prices, and finally the recent sharp sell off in US markets. 

Shares of China Digital TV (STV) sold off again this past week after reporting earnings on May 14th that handily beat street estimates by $.03. What seems to have spooked analysts and investors alike is that the company did not raise its full year revenue guidance. This left many to believe the company sees challenges throughout the rest of 2008.

China Digital TV (STV) went public on October 5, 2007 at a price of $16.00. The IPO was one of the most touted and desired of 2007 and shares quickly shot up reaching a high of $55.31 on October 9. Since that time, the shares have fallen over 70% and are now trading below their IPO price at $15.60.

Every day for the past two weeks, a new article or report has come out indicating that Google (GOOG) is on the brink of imploding. First it was the Comscore report indicating that Google’s paid search business had declined both sequentially and month over month in January. This report resulted in a tsunami of stories from business journalists and analysts that caused the shares to sink over 20% in less than a week. Comscore eventually downplayed the accuracy of the report, but the damage to Google’s shares had already been done.

Shares of Microsoft (MSFT) have declined over 11% since announcing the mammoth bid for Yahoo (YHOO) five weeks ago. Investors don’t like the fact the company will be spending $44B for a slow growing, margin compressing company that doesn’t want to be acquired. Furthermore, investors know that an acquisition of this size will take months, even years to fully digest. Like a 30 foot anaconda after eating a 30 pound capybara, Microsoft will be slow moving and lethargic, allowing arch rival Google (GOOG) to become even more dominant in all things online.

Investors considering opening short positions in shares of Sprint (S) at these levels need to exercise caution. The company's shares are down more than 70% from its 52 week high and have declined over 25% in the last week. While the company's financial performance more than justifies these reductions, significant future reductions are unlikely for the following reasons:

• The enterprise value of Sprint has fallen to just over $40B; $20B from debt (including the recent $2.5B loan) and $20B in market capitalization. At these levels, each Sprint subscriber is valued at just $760.00, less than half the amount that Cingular paid for AT&T Wireless in 2004 and nearly one fourth what TPG and Goldman Sachs paid for Alltel just last year.
• CEO Dan Hesse "kitchen sinked" the 2008 earnings forecast and set expectations to near ZERO. The company's forecast included a predicted a loss of 1.2M subs in Q1 and Q2, I would expect something less.
• Mr. Hesse has replaced the old leadership team and instituted a "back to basics" play book which overtime will significantly improve customer satisfaction and retention.
• The company borrowed $2.5B to pay off 2008/2009 maturing debt and provide liquidity beyond the $2B+ in cash they currently have on hand. Since this transaction will be used to pay maturing debt, it will not increase the amount of debt outstanding. In addition, the company eliminated their dividend which will save approximately $300M annually, further improving the company's liquidity.
• The value of the company's spectrum alone is worth well in excess of $20B. Just look at the bids from the latest government auction for proof.
• An announcement regarding the future of WiMax and possible investments from Intel are rumored to be coming the following weeks.
• Much of the incremental selloff of Friday was due to the overall market being down over 350 at one point. Shares of Sprint actually held up well on Thursday and only moved down of Friday after the credit rating downgrades.