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Technology Stocks : XM Satellite Radio Holdings Inc. (XMSR) -- Ignore unavailable to you. Want to Upgrade?

To: pcstel who wrote (563)	4/24/2003 9:13:49 AM
From: i-node	Read Replies (1) \| Respond to of 3386

This would be a valid conclusion IF the time to recapture your CPGA was completed in an "acceptable" time frame.. Years and a COC of 14% is no considered "acceptable" It's all about the ratios of ARPU to CPGA... In all my years of examining subscriber models.. I have never seen one as poor as SDARS. Even MSS models looked better than these. What is considered "acceptable" depends, to a large extent, on the size of the market and the potential gross margin. In your "yeas" of examining subscriber models, which ones offered the gross margin potential of XM? Not one. An investor will tolerate higher costs of getting started for a higher profit potential. Only a few months ago you were talking about how SACS/CPGA would NEVER come down -- you'd NEVER seen a subscriber model where these expenses came down. You referred to some cell phone company, which was, of course, irrelevant. Now, SACS and CPGA are coming down hard and clearly will continue to do so. Businesses are different. You can tolerate higher costs in one area if you make it up somewhere else. SDARS is expensive to get off the ground. But the potential rewards, given that subs get to certain targets, are extremely high. In the reality of subscriber models.. Decreases in CPGA on the scale of even $50 dollars takes several quarters if not years to achieve. That's why it's a great short... You may "believe" that those are obtainable.. But, in my experience.. It's just not going to happen. Your experience notwithstanding, it really depends on what the total costs are and the number of "gross adds" (I got that from high-school math). When you are experiencing exponential subscriber growth, the CPGA will decline correspondingly. I don't doubt your understanding of some subscriber models; it is clear, however, that you haven't analyzed this one correctly.