iBooyah.com Investment Matters

Scenario I

While the FCC chief has said they cannot merge, there is always a chance they can change their mind.  In fact, the statement made today was not even official.  Moreover, the FCC also stated they are willing to review the license agreement.  With enough smart lawyers and so much money involved, we believed if XMSR and SIRI are serious about merging, they will find a way to overcome the license prohibition. 

Scenario II

With the drop in valuation, these two companies have become more attractive for other potential buyers. Other possible suitors include AT&T (T), Comcast (CMCSK), DirecTV (DTV) and Echostar Communications (DISH).  The bottom line is if SIRI and XMSR become cheap enough, we believed their technology and brand is compelling enough to attractive other players.  Don’t count out the private equity firms as well.

Scenario III

Both companies continue to operate independently.  This is the least likely scenario in our opinion.  These two companies have proven they cannot reach profitability on their own.  Investors are getting nervous and most want to salvage their investment. Something will eventually happen this year.

Bottom line is the drop in XMSR and SIRI price is an opportunity to buy.  Given the stock has fallen so much, the overall risk has drastically declined.  We view this decline as a temporary drop.  This reaction is a knee jerk reaction; once investors have time to digest this information, we predict a recovery in price of XMSR and SIRI.