XM prepared for green Christmas
EmptyXM Satellite Radio chairman Gary Parsons acknowledged for Wall Street analysts Wednesday that satellite radio stocks have seen better days but predicted shares will recover when investors again recognize the industry's potential.
"Both companies have seen some significant pressure and questions about the (business) model recently," he said of XM and Sirius Satellite Radio. But satellite radio "is still by any account the fastest-growing new product of the entertainment variety since inception."
Shares of XM, down 50% this year, rose 1.7% on Wednesday to $13.53. They have risen about 30% since falling in mid-July on concerns that some of XM's hardware, previously forced off the market, would leave the company short during the Christmas season.
Parsons, speaking at the Goldman Sachs Communacopia conference in New York, laid those worries to rest, saying: "We will be in pretty good inventory shape across the board for the holidays."
Parsons lamented the disparity in the market capitalization of XM, at $3.6 billion, compared with Sirius, at $5.6 billion.
"There's clearly a valuation differential that is not sustainable," he said. "I'm trying to do a lot better job of making sure that the investment community understands the dramatically superior financial results, models and capabilities that we are driving," he said, "and hopefully have those reflected into our stock price."
Questions surfaced for the umpteenth time as to whether XM and Sirius have given any serious thought to merging. Wall Street has speculated for years as to whether federal regulators and current laws would allow for such a scenario.
While "there are clearly synergies," Parsons said, "the regulatory issues are nontrivial."
Also hampering XM's stock price, and that of rival Sirius, has been weak auto sales in the U.S. because the majority of subscribers come by way of newly purchased cars.
But Parsons said that General Motors, XM's largest partner and the one that has spooked Wall Street the most, accounts for far less than half of all XM radios sold via automobile sales, while XM partners Honda and Toyota have been picking up the slack.
Meanwhile, at Sirius on Wednesday, executives were busy denying rampant rumors that its star talker Howard Stern was considering a move back to traditional radio.
"Howard Stern is thriving on Sirius Satellite Radio," a company spokesman said. "There has never been any discussion of Howard Stern in any way, shape, or form being anything but exclusive to Sirius. Published reports suggesting otherwise are wrong."