What Sirius' Earnings Really Tell Us

Sirius also faces several operational challenges to achieve its objectives:

Howard Stern: The contract with "shock jock" Howard Stern is due to expire in late 2010. At best, should the contract be renewed, it will certainly cost Sirius a considerable amount of money. At worst, the company will lose Stern and subscribers.

Infrastructure: In a few years, Sirius could have to begin to upgrade its technological infrastructure. That could mean an increase in satellite and transmission costs.

Alt Tech: Alternative technologies could begin to supplant satellite radio demand. This includes podcasting, automobile Wi-Fi and Bluetooth-enabled MP3.

Sunspot Cycle: We are about to embark on another 11-year sunspot cycle. The last maximum period was in 1990-'91. High levels of sunspot activity will impact satellite, GPS and cell phone reception. While seemingly insignificant, it could cause an increase in churn come 2011-'12.

Sirius delivers an excellent product. We use it in my household. But many great product companies have failed in the past. Don't ever confuse a good product with a successful company.

The bottom line is that while improvements are in the pipeline for Sirius, I remain skeptical of the company's business model and financial strength over the long term. As a stock, it may provide some exciting trading opportunities, long or short, but I cannot endorse investing in the company's stock or debt.

-- Written by Scott Rothbort in Millburn, N.J.

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