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

To: HEXonX who wrote (6441)	2/20/2007 11:10:35 PM
From: rjk01	Respond to of 8420

Clearly, the stocks will be pummeled if the merger is quashed. Forget price levels the stocks were at before the proposal became public, they'll fall 15% or more below those price points. Moreover, they'd still have horrendous balance sheets, hot competition and diminishing prospects; if the deal is denied, the best thing shareholders could hope for is that a different media company, like Time Warner or News Corp., steps in as a buyer. "One negative is that the two companies now have acknowledged that things don't look so great going along on their own, so if that merger is not approved it's kind of telling shareholders 'You've got a problem if the merger doesn't go through,'" says Donald Hodges, manager of the $600 million Hodges fund. Hodges, an early investor in XMSR, had sold out of the stock and stayed away until last fall, when he felt it represented a good value again; on Tuesday, he sold 100,000 shares -- leaving his fund with 300,000 -- to lock in profits and protect his gains. "Prudence dictates that I lighten up [on my fund's holdings]; you can't deny the potential, but you also can't ignore the danger." The deal could be killed for antitrust reasons, because the perceived "competition" in the business would be over. But if the merger is allowed, the message being sent by regulators would be that consumers have plenty of options and that iPods, Internet radio and other services are ample competition for the satellite business. If that truly is the case, the merged satellite firm may not get all of its perceived cost savings, because it must stay priced to compete with those other options. "There's no doubt that the merger makes the business look significantly more attractive than it does now, but it's still a high-risk industry with a long way to go," says hedge fund manager Mark Sellers of Sellers Capital Management. "They're not going from two struggling companies into one powerhouse overnight." In the end, investors who like the look of the companies should now be in wait-and-see mode, limiting their downside risk by sitting on the sidelines. In that way, an investor can avoid the fallout if the deal is denied, and still have plenty of time to cash in on the merged company's long-term potential. Says Hodges: "Once you know the deal is done, you will be looking at a stock that's about $21 or $22 and that has the potential to go much higher if we see everything really work out. You may miss some gains right now, but missing those gains would be better than jumping in today and watching the stocks really fall drastically if the deal gets called off."