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

To: i-node who wrote (3246)	2/19/2007 2:00:19 PM
From: TimF	Read Replies (1) \| Respond to of 3386

I'm not a good source for details about either company, I'm just talking about "the big picture". I think cost savings could eventually occur, but 1 - It would take a long time, and 2 - Not all the savings would be synergies, some of them would be lower combined costs by lower combined size, reducing total cost, but maybe reducing total revenue as well (not necessarily lower total revenue than the current combined revenue, but lower than what revenue would have been assuming continued growth for the two separate companies). I suppose for the time being the two services could be run separately, but with one owner, and bidding against each other for content. Of course then you only save money as the contracts for content expire, and even without the two companies bidding hard for the content, the content providers might be very unwilling to take steep reductions in their compensation, you might get a slight reduction. You'd probably at least get much smaller increases in cost, but huge reductions might never happen, and wouldn't happen quickly. How long do some of the top contracts (for example Sirius with the NFL and Stern, and XM with MLB) have left to run? There there is the question of how the merger would be paid for. If one company buys the other with stock, you get a lot of dilution. If one buys the other with cash, you get a lot more debt. I assume that later wouldn't happen, I don't think that either company has the cash pile, cash flow, and/or credit rating to just outright buy the other, and leave enough left to cover combined operating costs.