Strange as it may seem, shares of XM Radio are up 6% on news that rival Sirius increased it year end subscription figure to 6.1 million from 3.3 million last year. Sirius stock is up by the same percentage.
But, XM released no news.
What gives? There are rumors of a merger. Perhaps XM would benefit more from a business combination, but that is not clear.
Another possibility is that the market thinks that if Sirius did well and had positive cash-flow in its Q4, then XM may also be cash-flow positive.
But, the most likely reason is the XM, with it larger sub base and revenue is further along the development curve to permanent profits. Sirius may have added a lot of its subscribers because of Howard Stern. They may not be able to repear that this year. Being cash flow positive in the busiest sales quarter of the year is nice. But, it is far from full-year results that show either company being past consuming cash for operations.
Both stocks are still near 52-week lows, so Wall St. is still appropriately concerned about 2007.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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