A recent article on MSN Money emphasized that Apple’s (NASDAQ:AAPL) decision to build in-house map program to replace Google’s (NASDAQ:GOOG) app will pose a threat to Sirius XM (NASDAQ:SIRI).  The argument the author provides is that this move will put Apple inside the cars due to the utility of mapping system for car drivers. However, we think differently.
Apple’s move is going to pose a threat to Google, that’s for sure. However, Sirius XM’s domain is completely different.
Sirius XM is a radio service with its own unique aspects including talk shows and surprise element of the song sequence as well as satisfaction of song discovery. Apple is not into that and there is nothing stopping Apple users from listening to songs from iTunes in their vehicles anyway. They can easily do it given their access to fast mobile broadband and ease of connectivity to car’s music system.
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Sure if Apple integrates itself in in-vehicle systems, that will take away some share of a car owner’s music listening time. However, Sirius XM does not just rely on listener hours as it derives most of its revenues from fixed subscription fee. Dropping Sirius XM due to Apple’s integration is something that people will not do unless Apple introduces directly competing radio service.
Our price estimate for Sirius XM stands at about $2.30, implying a premium of about 25% to the market price.Notes:
- Sirius XM’s greatest fear: Apple in the driver’s seat, MSN Money, June 13 2012 [↩]