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Time to Get Serious, Sirius

NEW YORK ( TheStreet) -- The more things change, the more they remain the same. Although Sirius XM (SIRI - Get Report) has done well this year, defying the odds and growing free-cash-flow (FCF) in the face of cheaper alternatives, like Pandora (P), there are still concerns about its business model, particularly what the company must do to maintain its strong profit margins, while also growing revenue.

When it comes to Sirius' business model, there has always been doubt. Truth be told, under former CEO Mel Karmazin, who sold 40% of the company to Liberty Media (LMCA) in exchange for a bag of beans, I never believed Sirius would have lived to see this day, much less questioning its FCF growth rate.

Even under new management, questioning the sustainability of Sirius growth will never get boring. Sirius, which relies predominantly on new car sales for its subscription revenue and profits, has benefited greatly from a strong rise in auto sales. Now with experts predicting that new car sales will advance close to 16 million units this year, it's hard to envision a meaningful year-over-year improvement rate, especially given that shares of Sirius have already soared more than 30% on the year.

The healthy rise in vehicle sales has not been lost on Apple (AAPL) and Google (GOOG), which have just entered the audio streaming fray with iTunes Radio and All Access, respectively. In fact, looking to prevail in the auto with its iOS platform, Apple has already signed agreements with some of the world's top automakers, including Jaguar, Mercedes-Benz (DAI), Chevrolet (GM), Honda (HMC), Volvo and Nissan (NSANY).

But unlike Sirius, which does have the advantage offering, for instance, non-music content like sports and talk radio, Apple is looking to offset this weakness with features that allow drivers to (among other things) receive iMessages, make phone calls and display Apple Maps. Not only that, but drivers will be able to execute these functions via Siri's voice command.

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