Reality May Be Catching Up With Satellite Radio Hype

Unlike most other technology firms that face immediate obsolescence and low barriers to entry, however, these two own exclusive rights from the federal government to broadcast radio from satellites --and the Federal Communications Commission has indicated that it intends to ensure that a duopoly (a two-company monopoly) continues in this space. In other words, the government doesn't want either to fail, it doesn't want either to acquire the other and it would prefer that neither is acquired by a broadcasting giant such as Clear Channel Communications(CCU) or a media giant like Viacom(VIA).

John LaForge, manager of the (PDSAX)Phoenix-Hollister Small-Cap Value Fund, said Sirius had been one of his rare purchases under $1 in the past six months. He said he believed the potential for a move to $3-$5 from his average purchase price of around 80 cents outweighed the risk that the creditors would fail to restructure the debt or that Ford would embrace a technology majority-owned by its top competitor. "Sirius you buy for getting the risks out of the way and then for the cash flow from subscriptions -- not for earnings," he said in a phone interview.

Recently, S.G. Cowen and a couple of smaller brokerages have raised their ratings on Sirius to buy or outperform from sell or avoid, but it is far from a mainstream story yet. In a few months, the company promises to release some slick new car and home models to rival offerings from archrival XM. And you can expect the advertising machine to get fully engaged by next Christmas.

Then will come the last real moment of truth for this nascent industry, as we learn whether enough consumers find the idea of high-quality, minimal-commercial radio appealing enough to pay for. If the service passes that test -- and particularly if the two rivals decide to make radios that pick up each others' signals, obviating consumers' concerns that they might get stuck with the wrong hardware in the event that they wish to change subscriptions -- then these two once-troubled stocks should have at least one or two more doubles ahead of them in the next few years.

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