Sirius Rewards CEO, On the Brink of Better Times

Mel Karmazin, CEO of SiriusXM Satellite Radio (SIRI), recently received a contract extension and a raise in his base pay from $1.25 million to $1.5 million. Additionally, Karmazin has the option to purchase up to 120 million shares at an exercise price of 43 cents a share.

Sounds like Mel got himself a pretty good deal considering the stock price has been hammered under his watch and he was only barely able to stave off a bankruptcy filing earlier this year.

At first glance, the deal to retain Mel looks as bad as the AIG executives did when they partied it up at half million dollar resorts after taking government bailout money.

However, the collapse of SIRI is not entirely Mel's fault. The Sirius-XM merger would have gone a lot smoother and enabled the combined company to realize merger synergies a lot earlier if the inept bureaucrats of the FCC hadn't sat on their thumbs for over a year as they decided whether or not to approve the merger. The FCC handling of the satellite merger was an extreme example of everything that is wrong with our government- they're great at spending money and OK at showing up to work, but offer little in return for doing so.

The ineptitude of the FCC combined with the collapse of the US auto industry are the true causes for the troubles of SiriusXM, and Mel cannot be blamed for those events.

In my opinion, the SIRI stock price is on the verge of rebounding to over a dollar and business operations are about to pick up. The Sirius iPhone application may just be the beginning of a new phase for SiriusXM. As the economy begins to rebound, consumers will be more apt to once again spend money on luxury items such as satellite radio.


However, if we don't see good news originating from the SiriusXM press release soon, investors are left to assume that Karmazin has a world of audacity to accept that offer. It would be a clear indication that the big man has no intention of taking care of shareholders and every intention of just looking out for himself. I don't believe that is the case.

Karmazin stands to make a killing on his stock option if the share price rises and I think he's built a company that offers a great service for a respectable price. If the cost of signing new content (half a billion for Stern was ridiculous) gets under control, Sirius will turn into a real winner of a company and a real winner of a stock.

Initial indications are that the iPhone app is highly popular and I'm interested to see where the company goes from here. For now, I stand by the fact that I see a spike to over a dollar pretty soon.

Just keep in mind that the company is still laden with debt, although the recent issuing of some senior notes pushed off the debt burden for a few years, and still faces the hurdles of a down economy and lagging auto sales.

Disclosure: VFC is long SIRI.

Comments

[SIRI-Doom:]

VFC Good Article

This article is fair in assessment and informative. I wish it was good news but it is news to stay in the light for the future.

I don’t agree that government was the problem. True, the FCC took way to long. However, the big ding came from Mel the day of the merger.

1. IMHO, the financing for the merger was more than “quick and dirty”, it was a disaster. It provided Goldman Sacks a lean guarantee with “off the books” shares that are still being used to short the stock. Add the misrepresented news that the lean shares saturate investor’s shares and we have a second disaster.

2. Public information later revealed that Mel discovered XM debt was more than anticipated. During the long wait for the FCC, XM continued to degrade. Mel should have backed away. Mel could have backed away and this can NOT be blamed on the FCC. Backing away would have saved 5 or 6 billion in “good will” debt. XM was on its way to bankruptcy in less than 8 months. The Small risk of some other company interfering with receivership was offset by the FCC having granted merger authority. Mel should have backed away.

So, Mel does the merger and now we hear mass loses and garbage justification “GOOD WILL DEBT”. That did a lot for the stock price.

Mel never had financing for a multi billion dollar merger. If you can believe that, I can find you some cheap ocean front property. “Quick and dirty”.

Advance in time to December 08. Mel needs financing again. (THIS IS PUBLIC INFORMATION WE CONFIRMED DURRING THE TAKOVER WAR) Mel had two private offers for financing on his desk 12 December 2008. Mel never told stock holders about these offers.

On 18 December 2008, during the Stock Holder Meeting, Mel got approval for a 10 – 50 for 1 rev split because supposable, “he could not get financing”. Mel turned down financing. He lied to Stock Holders! The pending/possible rev-split has loomed over the stock price like a plague.

Mel turned down both private offers on 15 December 2008. By April 2009 SIRI was near bankruptcy. A take over war followed were stocks and bonds were traded privately in an attempt to take SIRI away. Mel finally gave way to Liberty, Malone in the worst financing deal in US history. Mel sacrificed a board seat, 40 percent saturation, and incredible interest rates plus guarantees.

The New York Time quoted Mr. Malone, “We had made Mel private offers in December that were much better than the current deal”.

WHAT IS THE POINT: Every shred of bad news about SIRI since the merger has been directly caused by Mel. This gangster has nearly destroyed SIRI.

Today, we seem to be looking up. Everything is set for a nice pop in SIRI value. After everything Mel has put Stock Holders through, I can not help but wonder what Mel is about to do wrong next. What will the 2nd quarter reveal?

IMHO…
Heavy Long from Pre-Merger… and holding…

Jul 02 04:20 AM

[IBuriedtheU...:]

SIRI stock price brutally beating investors......

Sirius XM subscription rate hikes forcing down number of subs......

Charging for online access to further isolate and limit exposure......

and now, CEO Mel Karmizan springs a $250,000 pay raise.


Don't you think Sirius XM could have made better use of a quarter of a million dollars at a time when they are awash in heavy debt... than to give it to the person most responsible for driving away the most customers?

FYI: Former multi-subscriber over here. Found alternatives to Sirius and have been saving my money for more important things. Feel much better knowing I'm not feeding Mel Karmizan, Howard Stern, Martha Stewart, Oprah Winfrey and a bunch of other over-paid sat-rad duds.

Jul 02 04:34 AM

[SIRI-Doom:]

Hay Mel, I know you read Seeking Alpha from your Cayman Islands Condo.

If you want me to stop bad mouthing you, just get SIRI to 2.14 and call me so I don’t miss the trade. You know me. I am the one that quit the first day you said “Quick and Dirty”.

Any more stories you want to tell at "The Donald" birthday party?

Jul 02 04:49 AM

[JohnnyR:]

SIRI will remain a penny stock before ultimately fading away. There's no pop to $1.00 on the way- nothing to look forward to but more mismanagement, a reverse split and future bankruptcy.

I've terminated SIRI service and will dump this POS stock after the next quarterly report. I'm hopeful for a small very temporary jump to the.60s for a little extra profit before leaving this junk stock far behind.

Jul 02 05:48 AM

[jmsithy:]

So I guess Siri-Doom will always be broke good breaking news since we know when Siri-doom invested


On Jul 02 05:48 AM JohnnyR wrote:

> SIRI will remain a penny stock before ultimately fading away. There's
> no pop to $1.00 on the way- nothing to look forward to but more mismanagement,
> a reverse split and future bankruptcy.
>
> I've terminated SIRI service and will dump this POS stock after the
> next quarterly report. I'm hopeful for a small very temporary jump
> to the.60s for a little extra profit before leaving this junk stock
> far behind.

Jul 02 06:50 AM

[SIRI-Doom:]

LOL :-) Believe anything you NEED to believe....

Jul 02 07:16 AM

[siriusaldo:]

History teaches us that where Mel Karmazin goes, Howard Stern goes
!!!!!!!!!!!!!!!! HOWARD STERN AVAILABLE!!!!!!!!!!!!!...
NEW BILL BOARD IN THE MAKING

Jul 02 08:05 AM

[Mr. Stupid:]

You're not too bright buddy. BK is off the table now. Instead of trading you should look at cross-stitching. Better suits you. You never were a dedicated Siri subscriber so fess up and let's hear the TRUTH from you instead of rubbish.

Mr. Stupid


On Jul 02 05:48 AM JohnnyR wrote:

> SIRI will remain a penny stock before ultimately fading away. There's
> no pop to $1.00 on the way- nothing to look forward to but more mismanagement,
> a reverse split and future bankruptcy.
>
> I've terminated SIRI service and will dump this POS stock after the
> next quarterly report. I'm hopeful for a small very temporary jump
> to the.60s for a little extra profit before leaving this junk stock
> far behind.

Jul 02 10:13 AM

[107Sid:]

Mel's greatest, and perhaps only, skill has been self-promotion.

Jul 02 10:16 AM

[Mr. Stupid:]

Mel got a raise for his cost-cutting and free cash flow plan that will pan out very soon. This company is heading in the right direction now with all things coming together. The is the best buying opportunity this year and you heard it first right here from Mr. Stupid.

I've lost money and I have made some so follow me for I have been awarded with my due diligence and taken the next step forward to award others. I normally charge for my advice but you get it here free.

Take heed my friends and let your intelligence take you to the end of the rainbow. I say buy Sirius now and let it be your vehicle for your road ahead.

You heard it first here, Mr. Stupid

Jul 02 10:18 AM

[JamesPS:]

Most of the points are accurate, but spun in a negative manner, with some assumtions about motivation. What's importortant is where does Sirius XM go from here? Lets look at what's in the cards in 2009...

1. Additional Revenue from iPhone App.

2. Additional Revenue from passing on Royalty fees.

(These two will translate into profitability).

3. Starting to see some advertising dribble out.

4. Signs that exclusive contents is a primary concern for Sirius XM (Rosie and More Special Event Coverage).

5. DirecTV and Sirius XM bundles and cross marketing in the works.

6. Apps for Blackberry, WinMobile, etc.

7. Stern, NFL, and MLB on iPhone.

8. A New CEO contract with incentives to increase shareholder value.

9. Some preliminary signs that car sales may be picking up.

10. and a huge effort to reduce internal operating costs.

Where is the down side?

Jul 02 10:34 AM

[Crankly09:]

Anyone bashing this stock right now is either: mentally challenged or they have lost their shirts in the past and are bitter about the progress and good news ahead for SIRI.

The bashers opinions are meaningless, spiteful attempts to persuade us LONGS to get out before we make a bundle of money on SIRI......because bashers hate success story's when they've lost out.

Long Siri, Short Bashers!

Jul 02 10:46 AM

[relmar2003:]

"Sounds like Mel got himself a pretty good deal considering the stock price has been hammered under his watch and he was only barely able to stave off a bankruptcy filing earlier this year."

Sorry, but CEO's of spec companies are never gauged on what the stock price does, but how they execute. So this statement is wrong.
Hey everyone look, its Siri-Dumb , here again to make you dumber, on every article. Didnt read your posts again, because Ive heard your drivel before. You just repeat the same negatives and agenda over and over again, hopeing someone believes you , and sells there shares. Very evil to try to convince stockholders of a company on the cusp of greatness to sell at the bottom.(anything under .50 cents is the bottom). Wow, how do you live with yourself? Did you tell your vast amount of loving readers to buy at .07 cents? how about buy at .10 cents? How about buy at .12 cents? .15 cents? 17 cents? .30 cents? .34 cents? .40 cents? Didnt think so. Did you tell your post readers that the BK was bs, and to buy now. Of course you didnt. Do you know what the new sat5 does for the company? of course you dont. Do you realize that what effect the iphone and smart phone will have on the company? Of course you didnt.

Jul 02 11:48 AM

[VFC's Stock...:]

Relmar,

If you look back at my posts at VFC's Stock House, I was telling people to buy below ten cents. Did you know that? Didn't think so.

I sure bought and I'm sitting on some pretty hefty gains in my SIRI position right now because I bought a big chunk, by my standards, at six cents.

However, I also suggested buying in the twos.

I like SIRI myself, and would love to see it reach previously traded levels, but the fact is you have to look at every investment realistically.

SIRI is far from a sure bet, but it's far from a disaster.

And for the record, I've never suggested anyone SELL SIRI. That being said, I would completely understand people selling shares now that they had purchased for under ten cents. I'm waiting for the dollar mark before I do that!

VFC

Jul 02 12:22 PM

[SIRI-Doom:]

Well Relmar2003
Your childish outburst and direct attacks should get you a reward.

Thus far all I have been blogging about is Mel, poor management, and suspected manipulation. I like SIRI and use it. I would like to see it live.

I do NOT see life in SIRI under Mel’s watch. He has destroyed the company. Oh yah, everything looks good now that he has taken us to hell. You can make poop look good if your starving.

Let’s take a look at the company. SIRI has debt. SIRI has more debt than it can support. The interest on the debt is over 500 million per year. Mel has refinanced endlessly and mounted debt as if he had plans to print money like the FED.

Someone today provided this summary of upcoming debt payments. It is massive!!!
-----------
“so let's see, $500mil in interest each year (and going higher with
each re-fi)... plus the $260mil in convertibles that comes due in Dec...

2010: ~$500mil in interest plus $350 in loans coming due
2011: ~$500mill in interest plus $650 in bonds and loans due
2012: ~$500mil in interest plus $500mil in bonds and loans due
2013: ~$500mil in interest plus $1.8bil in bonds and loans due
2014: ~$500mil in interest plus $555mil in bonds and loans due”
----------

SAVE SIRI???
Currently and as in the past, SIRI can not support this debt load. SIRI would need 52 million subscribers at the current price. All SIRI spending would need to be kept to nil for the next 3 years.

The end of SIRI will come in 2013 if Mel fails to pay 2.3 BILLION that will come due. SIRI DOES NOT NEED TO BE HANDING OUT PAY RAISES AND CANDY!!! SIRI needs to pay down debt and keep the belt tight or else it is dead.

Mel is NOT the man you want to save SIRI. He will get paid and rob us all blind. Maybe Malone will take over in the real bankruptcy…

Long SIRI

Jul 02 09:50 PM

[SIRI-Doom:]

8. A New CEO contract with incentives to increase shareholder value.

What incentive? Mel's option is locked at a buy per share of 43 cents. He makes 60 million even if SIRI drops down to 1 cent, one penny.

LOL... Incentive for a crook gangster who makes more on SIRI in daily shorting than he does from good production. Wow, that is funny.

I wish people understood the true nature of how Mel has been making millions on SIRI. The man has intentionally destroyed SIRI.

Jul 02 10:12 PM

[SIRI-Doom:]

SIRI CEO Mel caused the mass shorting when he gave GS hundreds of thousands of shares to loan out as collateral on his original “fast and dirty” merger financing. Get a grip on a CEO that wants you to believe he had no financing on a billion dollar merger. Mel made himself millions on that financing and shorting his own company. Mel continuously screws you “Unwashed” stock holders.

The 2nd Q report will show lost subscriptions and the app failed to bring new subs. Wall Street and Main Media have been burned and given up on SIRI.

Jul 02 10:16 PM

[SIRI-Doom:]

Well Relmar2003
LOL...

Jul 02 10:18 PM

[SIRI-Doom:]

>>also the fastest App to be deleted from iPhones in history!

Yes, this is exactly what I have been asking. I don’t think the App is the great savior of this quarterly report subscription loses. It would have been better if Stern and Sports on the App. Maybe next quarter.

I think we need to brace for “less than good” news.

Jul 02 10:47 PM

[BigVinnie:]

You could of saved your money and kept sirius for a lifetime by buying a lifetime subscription for $500. Instead you chose to pay fee's that you know on a monthly subscription base is inevitable. SIRIUS needs money so the company wheels and deals. If you have enough money up front to float $500 for the lifetime subscription then it is the ultimate deal. If you wine and cry how you spent money month to month that was your decision on how you chose to spend your money. Sirius offers bargains to the consumer, if you are to blind to see some of the benefits that could be afforded for long term purchases you have a misguided opinion about this company and this stock.
Satellite radio continues to grow financially with very little advertising needed, this is based on ease of listening, convenience, and personal preference/genre that you cant get anywhere else as a consumer.
If your so broke to expect FREE, then jump on the bandwagon with the pandora/slacker fan boy's. Eventually those will be company's asking you to pay fee's as well. Pandora and Slacker aren't up on the most recent music/content, these companies don't offer there own line up of talk show content, or sports packages, and satellite radio has far more content than terrestrial radio. It is a universal multi media platform that far surpasses, any other product, whether it be wi/fi, internet, 3g, or satellite based reception.

On Jul 02 04:34 AM IBuriedtheUndertaker wrote:


> FYI: Former multi-subscriber over here. Found alternatives to Sirius
> and have been saving my money for more important things. Feel much
> better knowing I'm not feeding Mel Karmizan, Howard Stern, Martha
> Stewart, Oprah Winfrey and a bunch of other over-paid sat-rad duds.

Jul 04 01:17 AM