James Meyer: Welcome To The Sirius XM Hot Seat

| About: Sirius XM (SIRI)

Two weeks ago Pandora (NYSE:P) CEO Joe Kennedy announced he would be stepping down after ten years on the job. There was suddenly a lot of Internet chatter theorizing that Kennedy might be a good candidate for the Sirius XM (NASDAQ:SIRI) CEO job opening. SA writer Stephen Faulkner wrote that Kennedy would be a good Director of IP for the Satellite Radio Company.

James E. Meyer

Right now James Meyer is the current interim CEO of Sirius XM. Most Sirius investors seem very confident about his ability to run the company. But when he spoke at the Morgan Stanley Conference on February 26 someone asked him if there were any plans to expand Sirius Internationally. He said they were looking for opportunities and partnerships in Mexico, but that there were "no plans to go outside of North America". The room suddenly went completely silent. You literally could hear a pin drop. Why? Probably because of the now infamous remark (about former Sirius CEO Mel Karmazin) made last summer by Liberty Media (NASDAQ:LMCA) Chairman John Malone to the Wall Street Journal,:

So I tend to be looking out 10 or 20 years, whereas I think Mel in all honesty right now has got a pretty short-term focus. I think they do an excellent job of running the company (Sirius) but we would be making more investments and... would at least look at globalizing.

And did Malone include Meyer in the "they" when he said "they do an excellent job running the company but ..."? Meyer is currently still under consideration for the permanent CEO job. A better answer from him might have been "I/We plan to look into it." Considering that Malone, the major inside owner, wants to "look at globalizing" Sirius. Recently, he struck a mega deal in Europe via Liberty Global (NASDAQ:LBTYA) that could offer possible international bundling opportunities for Sirius in the future:

Malone, through his Liberty Global Inc unit, has made his most audacious bet yet on the burgeoning European cable market, striking a deal for about $15.75 billion to acquire Virgin Media Inc, the cable group in which fellow billionaire Sir Richard Branson holds a 3 percent stake. The deal is Malone's biggest ever in Europe and puts him in direct competition with Rupert Murdoch, the News Corp chairman who controls Britain's BSkyB.

It may be very significant that Liberty CEO Greg Maffei put out a brief statement the next day, after Meyer spoke, saying that the search for the new Sirius CEO is still "ongoing", and there are "several internal, and external candidates". Last November Meyer sold close to 30 million shares of Sirius at the same time Karmazin was "famously" selling his stock. Another blunder in my opinion. Even though Meyer had not been appointed interim CEO yet, this action gives the appearance that he does not believe in the future of the company, or the share price. Unlike Karmazin, he is only 57 year old; not at retirement age yet. His sales did not receive a lot of publicity at the time, but now this may be significant information for Sirius investors. According to Sirius XM Insider Sales at NASDAQ:

Insider Title Date T Type Shares Traded Last Price Shares Held
COOK STEPHEN Officer 02/11/13 S direct 105,000 3.1500 991,849
HOLDEN JAMES P Director 12/31/12 S direct 212,560 2.8800 140,672
SHAW JACK A Director 12/11/12 S direct 838,833 2.7507
DONNELLY PATRICK L Officer 12/07/12 S direct 509,550 2.7716
DONNELLY PATRICK L Officer 12/06/12 S direct 44,200 2.8500
FREAR DAVID J Officer 12/06/12 S direct 553,750 2.8263 1,000
HOLDEN JAMES P Director 11/07/12 S direct 128,070 2.7000 140,672
MEYER JAMES E Officer 11/07/12 S direct 6,008,894 2.7174 846,136
KARMAZIN MEL Officer 11/06/12 S direct 3,000,000 2.8247
MEYER JAMES E Officer 11/06/12 S direct 1,666,344 2.8349 846,136
GREENSTEIN SCOTT ANDREW Officer 11/06/12 S direct 3,471,017 2.8266
KARMAZIN MEL Officer 11/05/12 S direct 5,500,000 2.8279 3,000,000
MEYER JAMES E Officer 11/05/12 S direct 1,705,000 2.8341 846,136
GREENSTEIN SCOTT ANDREW Officer 11/05/12 S direct 3,471,017 2.8397
KARMAZIN MEL Officer 10/16/12 S direct 7,300,000 2.8087 8,500,000

Even though Meyer has stumbled a bit, I honestly don't think that Pandora's Kennedy could add anything "innovative" to Sirius. At the Morgan Stanley Conference, Meyer also said that they had looked at all the IP companies, and "Everything they do, we think we can do ourselves". That is pretty hard to argue against, since the company is rolling out My Sirius XM (MySXM) personalized radio which is "coming soon to iOS".

Granted, according to Kennedy, Pandora has over 150 million users. Of those there are currently 67.7 active listeners. But it's free. It is hard to establish someone's selling ability if he is giving something away. He has had ten years at Pandora to get it right. When the headlines and stories credit the jump in share price to his resignation, then a lot of Pandora investors must agree:

Shares of online music streaming company Pandora Media soared on Thursday following news that CEO Joe Kennedy will be stepping down after nearly a decade at the helm.

Ouch. As Karmazin used to say repeatedly: "the business model does not work at Pandora". And it is not just the business model, as I discussed in an article last year. The product is not as good due to content, annoying ads, data usage, and area coverage and reception. As far as Kennedy's expertise in IP, I doubt that he personally was involved in the Pandora designs. And what he lacks in the technical knowledge of satellites and the subscription business model would render him useless at Sirius.

Meyer may not be a "shoe-in" just yet. But I don't think he has to worry about Kennedy taking his job. Sirius is making lots of money right now and that is one of the main things that investors really care about. The first quarter of 2013 will be ending in ten days and the average results of twelve analysts polled by Yahoo Finance predict earnings to be up 50% over last year. And with new car sales up for the year, the subscriptions for this time period should be significantly higher also. Last year "the end of the quarter anticipation" sent the shares up from a low of $2.20 on March 29, to a high of $2.41 on April 2:

Sirius XM Prices 2012

Date Open High Low Close Volume Adj Close*
Apr 5 2.28 2.35 2.28 2.35 60,999,500 2.31
Apr 4 2.30 2.33 2.24 2.29 94,894,200 2.25
Apr 3 2.36 2.39 2.31 2.33 105,015,900 2.29
Apr 2 2.31 2.41 2.30 2.40 140,953,700 2.36
Mar 30 2.28 2.33 2.26 2.31 112,852,400 2.27
Mar 29 2.24 2.25 2.20 2.21 54,649,400 2.17
Mar 28 2.25 2.27 2.23 2.24 40,812,500 2.20
Mar 27 2.24 2.26 2.20 2.25 75,270,100 2.21
* Close price adjusted for dividends and splits.

There is no reason to think that the shares won't do the same thing again this year. But the future share price will have a lot to do with whether Meyer stays or goes. Institutions and major investors can make a lot of noise if they are losing money. But it will be very hard to find someone with the expertise that Meyer has in the satellite subscription radio business.

Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.