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Don't Under-Estimate Sirius XM

|Includes: Sirius XM Holdings Inc. (SIRI)


As the first several months of the year have gone on, I have written extensively in regards to what should be a negative growth quarter for Sirius XM as it applies to its subscriber base. As the day draws closer for the company to report, I am having second thoughts on that position.

There are several factors in my mind at play here, with the main culprit being the number of deactivations alluded to in articles from SiriusBuzz, The Motley Fool as well as my own sites, and

Yesterday I reported that there may have been a rise in some OEM penetration rates. That factor alone should help Sirius XM on its top line subscriber number. The bottom line question is in fact the number of deactivations that occurred in the quarter. That number alone will skew the subscriber numbers one way or another.

With that fact in mind, I realized that the company does not have to in fact, deactivate anyone. How many articles have we seen this past quarter that talk about how hard it has been to cancel a Sirius or XM subscription. Apparently, Sirius XM's customer retention department was working feverishly to retain subscribers in the quarter. Fourth quarter deactivations are also typically higher because that is when the prior years Christmas gifts and the accompanying 1 year subscriptions come up for renewal.

There was a two week free trial at the end of the quarter in which no deactivations occurred. In fact, I personally was not deactivated and that's how I know this to be true. I had changed banks when I moved and Sirius did not have my new information. I paid my fare April 1 yet I was supposed to have been deactivated on the 18th of March. It never happened. The free trial period that ran the final two weeks of the quarter could have slowed any bleeding considerably. Those 2 weeks would result in considerably less reported deactivations for the quarter.

Finally, most new car sales occur in the second half of the year, which means the highest number of deactivations of Sirius XM promotional subscriptions would occur in the same time period, rather than in the first quarter of a given year. Historically, February is the slowest month for new car sales as 2009 proved once again to be true.

Even with all of this information, I'm still not convinced based on the overall economy that Sirius XM has somehow pulled a rabbit out of its hat. I'm just not going to under-estimate them at this point.

Position: Long SIRI