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What do you do with a company that will have $3 billion in revenue in a few years -- up from a billion now -- has a loyal following, can raise prices and has huge market share and is taking more?
Do you sell it?
That's what people are doing with
, and I think it's a big mistake. When I
spoke with Mel Karmazin
last night on "Mad Money," I was struck by how Mel's delivered everything he promised, and then some.
He's got a $5 billion company with tremendous upside. Compare that with the $17 billion business of
that isn't growing at all. Or a radio business that, if spun out by
, would most likely be worth more, too, because it's profitable.
I think the quest for profits right now -- as opposed to free cash flow -- would be wrong for Sirius. This market's only used to going for earnings, but there was a time in the buildout of cable when all we looked at was cash flow, and we were thrilled to own those stocks.
The skepticism for this satellite business was right. The two companies,
( XMSR) and Sirius, had contempt for the shareholders and spent money like crazy. Their acquisition costs were out of control. Their willingness to pay anything for talent was cataclysmic.
Not anymore. Acquisition costs are going down. Business is less lumpy. I can see this network having hundreds of millions of dollars in commercials and twice its number of subscribers next year at this time because it is loved.
Plus, XM has blinked! It's ratcheted back spending and is not going to get into a price war, a content war or a subscriber war with Sirius. It has seen the light and the need for a benign oligopoly.
I was hoping for a combination of the two at some point. But two things have changed: This was the
breakout quarter for Sirius, and I don't think this new Congress would look kindly on a merger. We now have to deal with the notion that competition is good for the consumer, and the Congress is now pro-consumer.
So, let them sell. Let the brokerage houses downgrade Sirius, as Wachovia did this morning. The stock, after hurting people for years, is now done hurting people.
Worth buying. Worth buying right here.
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