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Technology Stocks : Sirius Satellite Radio (SIRI) -- Ignore unavailable to you. Want to Upgrade?

To: hedgehog26 who wrote (54)	5/10/2000 10:11:00 PM
From: bryston	Read Replies (1) \| Respond to of 8420

Some thoughts on your comments: -<I am using a five year horizon...the Yankee Group...estimates...40,000,000 vehicles.> Specifically, Yankee Group's (DARS industry) figures are: 29.8M @ YE2004 and 39M @ YE2005. Perhaps I'm being picky, but since we're in May of 2000, 67 months is 11.67% longer than five years. :-) Other estimates: ING Barings estimates 14.1M @ YE2004 and 19.4M @ YE2005 for the DARS industry. CEUT estimates 6.25M @ YE2004 and 10.24M @ YE2005 for SIRI, alone. -<Direct broadcast satellite commands 11% penetration> I believe the DBS industry serves as a good, conservative, model going forward for DARS. DBS's penetration, as you say, is 11%+/- after about five full years of commercial operations. I think a good case can be made for faster penetration in DARS. Perhaps DARS is more similar to DBS's impact on homes unpassed by cable. In that market, DBS's penetration is about 47% after the same five years of operations. Now, I don't expect DARS penetration rates anywhere near those levels, but it does make for interesting comparisons. -<nowhere in my model do I incorporate revenues coming from in-home entertainment, boom boxes, ... et al. I also have not included...advertisements> Don't forget the recently announced In-vehicle E-commerce (IVEC) initiative. From the 3/1/00, Sirius release: "Working together, Sirius and ATX are expected to deliver a full range of enhanced telematics functions and e-commerce options. This alliance is a critical step in Sirius? In-Vehicle E-Commerce (IVEC) initiative, which focuses on giving consumers the ability to make purchases directly from their cars. For example, with the touch of a button on their radios, listeners will be able to buy music, books, video, and other goods and services being promoted on Sirius Radio." Before investors get too carried away, though, the company needs to get the satellites in orbit. In my opinion, one of Sirius' self-proclaimed advantages (high satellite inclination angle) has an inherent weak link. They need three birds in orbit to provide uninterrupted service. With that in mind, the stock price will undoubtedly be quite event driven over the next two or three quarters. Additionally, they will need to begin production of chipsets in a timely and adequate fashion. This is a new technology and a start-up company, so we can't ignore the potential pitfalls and delays which either burn precious cash, incur additional debt, or dilute current shareholders. As always, I believe my information to be from reliable sources, but am open to corrections if errors are found.

To: hedgehog26 who wrote (54)	5/11/2000 1:46:00 AM
From: Manfred Sondermann	Respond to of 8420

Hi Hedgehog and Bryston, welcome on this board! >> "I am assuming a 56% after tax profit margin..." Thanks for your earnings estimate of SIRI. On the old CDRD board I made a similar estimate, (see siliconinvestor.com but in the meanwhile this is old stuff. In contrary to some of my previous posts on this SIRI thread and on the former CDRD thread I now think that the net earnings profit margin of SIRI will be between 40% and 45%: About 15 months ago David Margolese said that after a break even subscriber number of about 2 million, SIRI will have an EBIT margin of about 70%. So together with 40% taxes their net earnings margin will be 42% (60% 0f 70%). The remaining 30% (= 100% - 70% EBIT margin) might essentially be sales costs which they have to pay to Infinitum, Ford, DaimlerChrysler etc. Infinitum Technologies manages SIRI's subscriber management system, activates the customers recievers and bills their accounts. (Their other tasks: internet, in Vehicle E-Commerce (IVEC) applications and the implementation of advanced telematics functions.) In addition, for instance Ford gets about 20% (if i remember right?) of the revenues made by Sirius radios OEM-installed in their cars. More soon, Manfred

To: hedgehog26 who wrote (54)	5/11/2000 5:07:00 AM
From: Manfred Sondermann	Read Replies (1) \| Respond to of 8420

Hedgehog, let me try another earnings estimate of SIRI. I am looking at the far future, the final end, maybe in about 15 years or so, when SDARS has got its saturation. My assumptions for the year _2015_: -240 million cars, 90% of them have some kind of radio, ==> 216 million cars with radio. -35% of these cars have SDARS. (This lies somewhere between the MITRE estimations and and the estimations of the Soundview Group. see reply #57) ==> 77.8 million SDARS subscribers. -Let us assume SIRI gets 55% of them, and XMSR 45% (because SIRI has no commercials on their own 50 channels, whereas XMSR has a few minutes commercials per hour. And I think SIRI has the better satellite/reciever technologie) ==> 42.8 million Sirius subscribers for cars. -Home radios: 50 million homes might have sat radio. (Here I take the numbers of the MITRE corp.) Maybe 35% of them go to SIRI, and 65% to XMSR, because XMSR has the better programming for hispanic people, a very fast growing part of the US population. ==> 17.5 million home subscribers for SIRI in 2015. Now some of these home subscribers also have Sirius radios in their cars, so they might get their second sat radio service for half price. So the 17.5 mil would perhaps correspond to 10 million "full" subscribers. (Just a guess). -Ships, boats and planes: let me assume another 200,000 subscribers for SIRI. -Together SIRI might have 53 million subscribers in 2015. -SIRI needs 2 million subscribers for EBIT break even, so 51 million subscribers contribute with 42% net earnings profit margin to SIRIïs earnings. (see post # 56) -My guess is that in 2015 the subsciption price is about $12.50. (Note that someone of the management recently said that a lot of people might be willing to pay a Dollar more for Howard Stern programmings, so I think SIRI is thinking of rising their subscriber prices some day.) ==> $150 revenue per subscriber and year. -Let me add to this number another $25 per year and subscriber for CD ordering commisions and advertising of the 50 channels left. ==> $175 revenue per subscriber and year. -Let us assume 72 million commons in 2015, after all options are exercised, all Preferreds are converted, and maybe some other 6 million stocks are sold to go through the first 2 years. -in 2015 I still expect a PER of 25 - 30, after the whole system is established and might have no more growth in their kernel business, but SIRI is a high profit margin company, and I think they will use this money to invest somewhere else in some other media ventures. With all these assumptions we get: Total revenue in 2015: $9.275 billion ($175 * 53 million subscribers). Net earnings in 2015: $3.75 billion !!! ($175 * 51 million subscribers * 0.42 profit margin. (note: 51 million, not 53 million) Earnings per share: $52 in 2015. ($3.75 billion / 72 million) Result: =================================== SIRI quote in 2015: $1300 - $1560 =================================== Some final remarks: Of course a lot of other things can happen until 2015. Perhaps the FCC might sell a few additional SDARS licences, But on the other hand I think that SIRI will buy back a few of their commons till 2015, (they will have enough money for that !), and this might compensate the stock prise to the growing competition. Although I have "calculated" this quote for the year 2015, I expect this quote much more earlier. Because SIRI is connected to the telematic business, and telematic stocks will experience the same "irrational excuberances" in a few years (imagine this extremly huge market, when besides the US and Europe also a lot of Asian want to have their own cars in 10 years!) that we have seen in the high tech, internet and biotech business. Regards, Manfred.