Sirius' Fourth Satellite Would Put It On Par With XM

06-16-2005

Bear Stearns reiterated a "peer perform" rating and $6.50 price target on Sirius Satellite Radio (nasdaq: SIRI - news - people ). "As the chess match between XM Satellite Radio Holdings (nasdaq: XMSR - news - people ) and Sirius continues, we think Sirius is actively considering the pros and cons of launching its spare satellite. While near-term free cash flow would be hampered, positives such as reduced business risk and a more robust signal would be realized." The research firm had talks with Sirius senior management discussing recent moves by both companies, which include: Sirius upping its capacity and inking deals with Sprint (nyse: FON - news - people ) and Ford Motor (nyse: F - news - people ); XM will add a fifth satellite, initiated a $300 million share offering and signed a deal with Audible (nasdaq: ADBL - news - people ). "Our takeaway is that it would make sense for Sirius to launch its fourth satellite as an in-orbit spare to avoid service interruptions/degradation should a satellite fail. We think Sirius may refurbish the satellite to increase power levels. . .We think that a fortified satellite would augment Sirius' already strong signal reception, allowing better coverage for the mobile market. This would put the company more on par with XM, considering XM's accelerated capital expenditures plan." Both firms will be waiting to hear Canada's decision on whether or not to allow satellite radio within its borders.