Stock of satellite radio providers XM, Sirius up

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CHICAGO - The shares XM Satellite Radio and Sirius Satellite Radio rose 5.4% and 5.1%, respectively, on Friday capping a week of gains amid talk of a merger between the rival satellite radio providers.

The shares of XM Satellite Radio Holdings Inc. gained 89 cents each to $17.27, while Sirius Satellite Radio Inc. was up 20 cents at $4.10 in midday Nasdaq trading. XM is up 12.7% from its close last Friday, while Sirius shares have gained 7.9% in the same period.

"Over the last seven to eight days, there has been chatter by prominent Wall Street analysts discussing the possibility of Sirius and XM Satellite merging and the synergies that would result from this combination," said Paul Foster, options strategist at Web information site theflyonthewall.com.

Both Sirius and XM are growing rapidly, but losing money as they try to improve technology and sign top entertainment ranging from the largest U.S. sports leagues to media celebrities such as Howard Stern, Oprah Winfrey and Martha Stewart.

Stifel Nicolaus analysts said in a client note on Thursday that XM appears to be contemplating a tie-up with Sirius and estimated a merger could save the combined companies $7 billion.

Analysts said the merger also would end their fierce battle for dominance and, as a result, attract regulatory scrutiny.

On Tuesday, Sirius said it paid shock jock Howard Stern a bonus worth nearly $83 million for surpassing subscriber goals set in a 2004 contract that had already turned heads with its $500 million compensation package.

Sirius had roughly 600,000 subscribers when it signed up Stern. Last week, the company reported it ended 2006 with more than 6 million subscribers, at the middle of a forecast range made in December.

On January 5, XM said it ended 2006 with more than 7.6 million subscribers, a number that fell short of internal targets due to softness in retail demand, after adding over 442,000 new net customers during the fourth quarter.

XM also said it achieved positive cash flow from operations during the fourth quarter, according to preliminary results. Media companies typically use cash flow as a measure of financial performance.
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