Satellite Radio Evolution (XMSR and SIRI)
Satellite radio providers such as XM (XMSR) and Sirius (SIRI) was suppose to be the next big thing when first launched. After several years in the market place, it is proving to be a tough proposition. The idea of paying for radio just never caught on. Moreover, the fact consumers must buy hardware has prevented the technology from reaching critical mass. 
The startup cost makes no economic sense. This is the fundamental problem facing companies such as XM and Sirius. Both XM and Sirius appears to be in deep trouble. The future of these two companies appears bleak to say the least.
The stock performance of these two companies moves in parallel; both are moving downward with no support level. To survive, these two companies must merge. If these two companies continue to compete as they do today, both will eventually end up bankrupt. There are simply not enough customers to go around as this is a niche market. Even luring big names such as Howard Stern won't help the situation in th forseeable future.
Our prediction is in the next six months, these two players will have not choice but to merge. Once they merged, the combined company will eventually be acquired by a larger company such as EchoStar (Dish Network) or DirectTV. In our view, becoming part of the satellite TV providers makes sense going forward.
If your tolerance for risk is high, our recommendation is to buy a small position of Sirius as we believed this is the company that will eventually get acquired. Trading nears its all time low at $3.85/share; Sirius represents an opportunity for a speculative play. In our view, the upside potential outweighs the downside at the present price.
