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SG Cowen Downgrades Sirius

New York – Sirius Satellite Radio’s stock price fell 8 percent Monday after it was downgraded by the Wall Street firm SG Cowen, according to a Reuter’s report.

SG Cowen cited Sirius’ lower than expected subscriber acquisitions for the third quarter, and it’s lag behind rival XM Satellite Radio in OEM sales as key reasons for its downgrade to ‘market perform,’ from ‘outperform.’

It also cited the new XM Direct universal tuner, which will allow any OEM radio, including Sirius-ready radios, to work with XM service, essentially making it an XM converter. The first of the XM Direct products, for BMW and MiniCooper models is currently available, with packages for additional car makes and aftermarket brands to be announced this January.

The ‘XM Direct product could weaken dealer installs,’ according to the report. It ‘will enable XM to target the large number of Sirius-ready vehicles being shipped by Sirius’ exclusive OEM partners DaimlerChrysler, Ford and BMW. It will also give the automotive dealer, who previously could offer only Sirius, the opportunity to offer either Sirius or XM. Further, it may encourage dealers to not order factory-installed Sirius systems, but to just receive the Sirius-ready vehicles so the customer could have an XM or Sirius choice,’ the company said.

Reuters said that XM shares rose more than 3 percent yesterday as a result of SG Cowen’s downgrade of Sirius.

A Sirius spokesman responded, ‘If you look at the downgrade, it wasn’t just because of one factor and all analysts have a right to their opinions.’ Regarding XM Direct, he said, ‘This is a dealer add-on they are proposing, not even a dealer-installed option. It would violate the warranties on the cars. It’s also a dumb-down device. It’s a translating device that degrades the signal. So we don’t see this as a major issue at all.’

The SG Cowen report states that Sirius’ recent subscriber additions of 44,426 fell short of the 57,000 expected. Sirius’ aftermarket share is at 24 percent, SG Cowen said.