By Relmor Demitrius

By now product reviews, projected sales information based in some reality, and media input aplenty is out on Motorola Inc.’s (NYSE:MOT) new smart phone, the Droid.  The Droid was the first smart phone to utilize Google’s (Nasdaq:GOOG) new Android 2.0 operating system, introduced as a direct competitor to the Blackberry and Iphone operating systems, as well as the Palm, which is reportedly not doing well.  With any technology that has fans that are loyal to other products, getting a real feel for consumer sentiment on any new technology is risky at first, and best left instead to time.  Enough time has now passed for a good feel on this phone to be achieved.  Sales numbers appear to be decent to good.  The reviews on the phone itself are mixed, but mostly positive.  It has been as boldly called the Iphone Killer (which is ridiculous) to a washed up attempt to catch up in the smart phone space that is going to fail miserably(even more ridiculous). What is that old saying?  Somewhere in the middle lies the truth?  I think that is exactly the case here.    

I don’t think the phone will be a failure, but the Droid has much competition, even within the same Android 2.0 market it uses to run its phone.  Since HTC offers the same operating system (OS) at the same dealers as does the Droid, there is competition even amongst the OS users themselves.  Imagine two very similar phones called the Blackberry and the Redberry, each phone basically the same.  Of course it would affect sales of the Blackberry.  Not only does Motorola have to compete with other smart phones, it has to compete with other smart phones running the same OS as they are.  Was Motorola blindsided when Google released and marketed heavily its version, the Nexus One?  Maybe, maybe not.  Would Motorola had done anything differently anyway?  Probably not.  Regardless, they did the right thing partnering with Google. 

Motorola is indeed back being relevant in the cell phone market it invented, but this offering is by no means going to kill anything, except maybe perceptions that Motorola can’t make a phone anymore people want.  People do want this phone.  Sales are brisk, and they are offered on the largest cell phone network in the United States, Verizon, with aggressive sales backing it up on the floor.  When I went to my local Verizon dealer, I asked for a good smart phone, and the salesman first showed me the Droid.  According to some reports, this is not untypical.  Over 500,000 units have probably been sold by now, and those numbers will increase as HTC stalls due to impending lawsuits from Apple over patent infringements on its smart phone.  Apple is claiming some of their features infringe on their “intellectual property”.  Ironic, I know.  Apple is considered an industry leader in “borrowed” intellectual property. Swallowing the irony, lets continue.

We have many parties chiming in on the phone now.  Reviewers from CNET, Los Angeles Times, and PCMag.com all give the Droid favorable reviews.  Time magazine listed the Droid as number one on their “Top 10 Gadgets of 2009″.  Verizon is quoted in November as being “very pleased” with Droid sales, and are excited about the product.  What are consumers saying.  Product review sites from consumers talk mostly positively about their experiences with the phone.  Enough reviews have come in by now that a decent real feel of sentiment can be seen.  Some points of interest from consumers:

It seems to be durable and the keyboard feature is something an Iphone does not offer.  (Personally I can’t stand touch screens, so it has a huge leg up on the Iphone right there.) It has a superior network than the Iphone.  If a cell phone is to be judged on its main feature first, usability as a phone, than this phone has a nice leg up on the Iphone from Apple (Nasdaq:Aapl) in that regard as well. 

If your not a Blackberry fan, and you like your phone to have the best service and blazing fast internet capabilities, maybe the Droid is the phone for you. 

It has a large screen with excellent picture quality. 

The camera is supposedly inferior to some phones, and this would be consistent with inferior cameras in many Motorola phones over the years. 

Some feel it is bulky.  Some actually like this aspect however.

The Droid will be just one of 6 smart phones Motorola sells in 2010.  Motorola has shipped 2 million smart phones total internationally in 2009.  They are committed to their smart phone line, and will continue to market them aggressively.  Any first smart phone from Motorola has to be considered relevant, and definitely a company to watch as they begin improving the version, and offer other models later down the road.  Is Motorola back in the cell phone game?  Maybe, but it’s way too early to tell yet.  But I definitely like the signs of life coming from a once proud innovator of many new technologies.  Their CEO, Sanjay Jha, is a great cost cutter and knows production.  Throw in some Motorola innovation and maybe the Droid is the first step to Motorola’s recovery process.

By Relmor Demitrius -

Sirius XM Radio (NASDAQ:SIRI), which is 40% owned by Liberty Media (NASDAQ:LCAPA), achieved something few companies in their industry, if any, did in 2009:

They came out of 2009 in better financial shape and returned to subscriber growth during one of the most difficult economic periods possible. 2009 was a troubling time for the newly merged radio companies.  Huge debt obligations were due, the economy was in shambles, and the auto industry wasn’t selling enough cars. 

What a difference a few quarters can make.

The satellite radio company entered the year with 19 million subscribers.  After losing 500,000 subscribers in Q1 and Q2 combined, they regained 105,000 back during Q3, reversing the trend.  That leaves them with around 400,000 subs under what they started the year with as of Q3. 

Let’s run the numbers and see what Q4 will probably look like:

October through December auto sales totaled around 2,593,000 for the United States.  Penetration rate of the company’s products in these vehicles was going to be in the high 50’s, according to Mel Karmazin, CEO of Sirius XM Satellite Radio. Im going to assume 58%.  By this figure they should be adding (from the OEM channel) around 1,503,940 new subscribers, while losing around 1,053,000 from deactivations (assuming a 1.9% churn rate, lower than last quarters, but higher than Q4 of 2008).  Im giving credence to improved economic conditions, but also still accounting for a supressed economy.  1.9% churn should work for this calculation.  During the last 3 quarters churn has been 2.2%, 2.0%, and 2.0% respectively.  Assuming 1.9% in a traditionally strong churn quarter is fully reasonable given the conditions.

So from the OEM channel alone Sirius XM Radio should gain approximately 450,385 new subscribers in Q4.

Retail subscribers will affect this total however.  Last quarter SIRIUS XM Radio lost around 400,000 retail subscribers.  This is due primarily to line up changes, lag in new radios, switching to OEM promo subs, upset over royalty fees, internet charges, and confusion with the merger and bankruptcy scare.
This caused distribution, innovation, and huge marketing delays.  Sirius XM has now corrected all these problems.

In the 4th Quarter, Sirius XM Radio launched an advertising campaign to sell the brand more aggressively to consumers.  Also heavily advertised were a slew of new radios, including the Skydock, made by Audiovox Corporation (NASDAQ:VOXX), which just noted strong satellite radio sales in their quarterly report.  Reports had been circulating that Audiovox had possibly 300,000 units into the market, and expected these units to move quickly.  The Skydock appears to be a strong seller, as reflected by interest in the Skydock’s software application, which is showing high download rates. It was in the top 50 free applications from Apple for months.  Every download of this application would be for the sole purpose of activating the radio, so these numbers directly reflect an increase in subscriber numbers from Skydock alone.  Some internet sites and retailers completely sold out of the Skydock itself.

This unit allows satellite radio to play with Apple’s (NASDAQ:AAPL) Ipod and Iphone products. Also factor in another 3 months of the iPhone/iPod application, more time removed from all those mentioned negatives to consumers, and I believe retail will finally start to settle down. This would be huge to their subscriber totals because the OEM channel is now a plus again due to auto sales rebounding nicely by the end of the year.
However, trends are trends for a reason.  Until I actually see this trend reverse, I cannot assume it will simply on improving conditions of the retail market.  Best Buy, Radio Shack, and other retail outlets have been aggressively marketing these products, including the Apple Store.

With all that in mind, I’m going with a loss of 100,000 retail subscribers, a huge improvement from Q3. 

Economic conditions seem to be improving, and Sirius XM Radio has weathered 2009 far better than most, with almost the same number of subscribers it went into with.

Q4 total Subs.   : 18,865,000 subscribers
Total gain       : 350,385 new net additions
Churn            : 1.9%
Penetration Rate : 58%

Self-pay subscribers will probably uptick slightly as well.  These are the permanent customers who pay monthly for the product, and are not counting promotional subscribers in this total.  I’m looking at still under 16 million here, but with small improvements.  I am using improved economic conditions, less confusion about the company and product, and a host of new and exciting products from the company, like the recently announced XMp3i, which is a portable Mp3 player and satellite radio, the Sirius Stratus 6, which can host the a la carte packages from Sirius XM, a new Garmin/XM radio for the motorcycle, and of course the XM Skydock for the Iphone/Ipod.  Audiovoxx reporting strong sales supports this theory.  These are the same reason I expect the retail sector to lose less subscribers than last quarter.
 
My next article will be for earnings projections on Q4.

Disclosure: Long SIRI

By Rick King -

Surprising investors – Sirius XM Radio (NASDAQ: SIRI), which hosts programming for Howard Stern, Rosie O’Donnell, Opie & Anthony, and Oprah Winfrey, anounced break-even earnings for the first time since the merger of Sirius and XM Radio this past year.  Wall Street had mainly expected a 2 cent loss and investors were waiting anxiously in the aisles this morning during it’s Q3 FY09 Conference Call.  Even through the difficult economic crisis of this past year, the company continues to show signs of continued growth as it improves its finances and minimizes operating costs each quarter. (more…)

By Relmor Demitrius

In this preview of the much anticipated Sirius XM Radio (NASDAQ: SIRI) Q3 Conference Call, I will address what many investors feel will be important factors in determining whether Sirius XM’s third quarter results are considered a success, neutral, or if it has points of concern.  In analyzing any company’s balance sheet, a clear history of their past performances compared to current results is important.  Apple (NASDAQ: AAPL) making $1 a share is considered a failure, while Sirius XM making $1 a share would be considered the biggest financial turnaround in the history of the market.  It’s all perspective. A wise man once said, perception is reality.

This is mostly true, but a more important factor is whose perception of reality we should be concerned with here.  Retail investors?  Retail investors do control to a degree short term price movements on high volume, this is true, but for true value and sustained gains  most experienced investors know its big money that moves the markets.  Especially any one stock.  Huge institutional interest (Sirius XM did indeed gain a higher percentage of ownership through institutions from Q1 to Q2, and I would expect this to be a trend as long as the stock price is low and the company continues to improve) moves stocks and keeps them stable investment vehicles. (more…)