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Sirius XM Investors: Stop Chasing the Carrot and Buy Pandora

NEW YORK (TheStreet) -- Insanity is described as doing the same things over and over again and expecting a different result. Perhaps its merely stupidity.

Whatever the case, there are investors of Sirius XM (SIRI) pathetically incapable of realizing that the carrot they have been chasing over the past three years is really out of reach. It has become more of a figment of their imagination. They have yet to realize that they have all been a part of someone's poor attempt at humor by being convinced that they can acquire wealth simply by investing in the idea of satellite radio.

On the heels of Pandora (P) announcing better-than-expected earnings, it was once again time to reassess the long-term viability of Sirius XM -- one that will pin its satellite delivery mechanism over the simpler and more scalable IP format that is used by Pandora, Last.fm, iHeartRadio and a host of other lesser known companies.

As easily I as I have named these alternatives to satellite radio, remarkably Sirius investors are quick to point out that the company is a monopoly ad has no competition. But they don't realize what an indictment this would be on the company if it were true.

As great as it is to constantly proclaim that Sirius has no competition, astute investors can easily study the company's recent performances, its balance sheet and its income statements and ask some very important questions. For instance, why has the company demonstrated such a struggle to secure 50% of the auto market if it has the market all to itself? Essentially, with no competition, not only has Sirius failed to lock up subscribers at an impressive rate, but it loses subscribers to cancellations at a faster rate than it secures them -- at a ratio of almost 7 to 2, and that's being conservative.

For 2011, the company reported 7 million cancellations, while growing subscribers by only 1.7 million. So does that sound like an investment based on anything more than hope -- or as I like to call it, chasing the carrot?

Pandora

What this should tell investors is that not only is the model not working, but they should bail and find one that is.

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