Sirius XM CEO Mel Karmazin Dismisses Rumors of Job Offer

By Brandon Matthews

In a Fox News exclusive, Sirius XM Radio (SIRI) CEO Mel Karmazin sat down with Neil Cavuto to discuss the current Satellite Radio environment. Karmazin reiterated his position that Sirius XM is now a cash flow growth story as opposed to a subscriber growth story, as he described the newly merged Sirius XM Radio’s generation of positive free cash flow. He indicated that free cash flow is what will enable the company to pay down debt, buy back shares of its stock and make acquisitions.

Seemingly frustrated with misconceptions of those critical of “overpriced” talent, Karmazin explained that he has been witness to such misnomers throughout his career, and that the company is prepared to pay what is necessary to attract and retain such talent as Howard Stern.

Karmazin dismissed any rumors that he might consider another job offer stating that he would not accept a job as number two to Warren Buffett and that no amount of money could convince him to leave Sirius XM Radio. Karmazin explained that he has no desire to run another large media company.

In taking on the competitive landscape, Karmazin likened the competition to an era where 8-track tapes were supposed to have been the end of terrestrial radio. Stating that Sirius XM realized trailing earnings of $2.5B a year, Karmazin goes on to explain that this interview, for example, was being listened to all over the country as it occurred on Sirius XM Radio, and that the content available on Sirius XM Radio is much more than just music.

Position: Long SIRI

Comments

[R A F]

This brief synopsis of the Karmazin interview highlights some of the main points covered in this remarkable turnaround but - to get the full flavor and impact of all the positives that are now occurring under Mel's direction, I would suggest all readers go to Satwaves.com and see Brandon's more extensive writeup and view the video link provided to see the interview in its entirety (approximately 10 minutes). This is essential viewing for all who are interested in Sirius XM - as it really provides the details of vastly improving dynamics within the company and the optimism that starts at the top executive level. Most - if not all - of the erroneous allegations and misrepresentations that have recently - and persistently - been put forth on an almost daily basis by the usual, well known "bashers" should be totally and thoroughly dispelled by Mel's comments in this interview - as he outlined the basics of a company that has most successfully turned the corner from the difficult environment (economic and delayed merger) of the last eighteen months. His main point - and number one metric - is free cash flow - and he expects this to grow from quarter to quarter through 2010 and beyond. Couple this with his long term commitment to getting and retaining the best talent CONTENT on radio - and you now have an unbeatable business model. One very interesting point - in my opinion - was no mention of any reverse-split, but - rather - Mel did mention that the increasing free cash flow would enable buy backs of stock, paydowns of debt, and the ability to continue to upgrade content for distribution. This - to my way of thinking - should completely put to rest any talk about the need for a premature reverse split any time in the near future. From Mel's comments, I would infer it is more likely that stock buy backs will be the preferred tactic to increase share price in 2010. I believe all who view the interview through the link provided on Satwaves will come away with a much more accurate sense as to how the company stands now and a better understanding of the superb business plan that is now being implemented under the competent direction of Mel Karmazin and his staff - relying on the most extensive background in the industry.

2009 Nov 17 07:30 AM

[valuestocksonly]

I get this tingly feeling that something HUGE is in the works. Can not wait to see the synergies with DTV, reactivation of used car radios etc... the commercial is very important and well done.

2009 Nov 17 07:37 AM

[Pell]

I agree as Mel hit (And agreed) with all my points. Company needs positive cash flow to pay down debt and get rid of the dilution in shares. Hopefully all is acheived in the coming quarters. Those points were never bashing the company.

Mel needs to appear more and more on the media circuit to push SIRIXM for the stockholders. He is the number one cheerleader for the company and current and future stockholders need to hear from him.

I'm glad he was not asked about the R/S and therefore did not have to address it. However (And please correct me if I am wrong) there was no mention of the SKYDOCK. This reinforces what I believe as well as Tuna Amobi that this product will not increase subs but may help retain subs. A good thing as it appears that cash flow is the primary concern being addressed.

Mel also addressed how the car market is and will always be for the time being the biggest source of new subscriptions. I agree and think it is the best business model. As he said it is great to see an AM, FM and SIRI button on the radio when you sit in that new car. That beats any advertisement out there.

That is the future and I believe in it.

2009 Nov 17 08:25 AM

[SouthernBeachGuy1960]

Brandon, like always great work! Over the past 14 months holding Sirus Stock, I have lost my interest in Sports Heros.......Brandon has assisted me on making 72% on Sirus and the future looks Rosey. Brandon is my new Hero (Wow how greedy is that, liking Money more than Football & Baseball......though, I may still like Alabama better on Saturdays........Roll Tide).

2009 Nov 17 08:27 AM

[thejuice31]

Brandon - I love the information you provide on SIRI. But you gotta be careful with your accounting terms. SIRI won't have 2.5B in earnings, they will have 2.5B in REVENUE. =)

2009 Nov 17 08:53 AM

[Erwin]

The interview reaffirms that Mel will never abandon his baby
for money, and would never leave the company until successful and insures his reputation in the corporate business world.

2009 Nov 17 09:03 AM

[1more4me]

Seriously? Berkshire Hathaway # 2 spot and he just fiddles it off to no concern- Umm- that's a pretty significant vote of confidence in SIRI- where it can go and what it can do for Mel as well...

Second point- Mel said "buy back shares". Yes- "buy back shares".
There is NO R/S if they "buy back shares"... They don't have too- don't need too- It would be like paying OFF your mortgage- then refinancing... They don't ever go together....
Good stuff!!! Might get more...
GREEN TRADES

2009 Nov 17 09:11 AM

[Pell]

Appreciate your enthusiam about "buy back shares" which I agree would be the best case scenerio.

But first comes positive cash flow, then comes paying down debt then if there is anything left over I would love to see a buy back of shares. I just don't think time permits as Mr. Amobi said SIRIXM is in a Catch 22 due to time constraints. Plus Mel wasn't asked about the R/S so why address and remember as CEO he is there for the positive not the negative (Even though I do not think a R/S in this case is negative). Plus I also agree with Mel about signing the talent at the price the market bears, after all this product is about the talent. So I believe any excess cash flow would go to the talent (As it should) before buying back shares.

But overall I wish a stock buy back happens that would be great for all us longers. Unfortunately I don't think it will happen in the near future and time is not on their side.


On Nov 17 09:11 AM 1more4me wrote:

> Seriously? Berkshire Hathaway # 2 spot and he just fiddles it off
> to no concern- Umm- that's a pretty significant vote of confidence
> in SIRI- where it can go and what it can do for Mel as well...<br/>
>
> Second point- Mel said "buy back shares". Yes- "buy back shares".
>
> There is NO R/S if they "buy back shares"... They don't have too-
> don't need too- It would be like paying OFF your mortgage- then refinancing...
> They don't ever go together....
> Good stuff!!! Might get more...
> GREEN TRADES

2009 Nov 17 09:19 AM

[Jerrold Williams]

Maybe you need counseling.....OMG!


On Nov 17 08:27 AM SouthernBeachGuy1960 wrote:

> Brandon, like always great work! Over the past 14 months holding
> Sirus Stock, I have lost my interest in Sports Heros.......Brandon
> has assisted me on making 72% on Sirus and the future looks Rosey.
> Brandon is my new Hero (Wow how greedy is that, liking Money more
> than Football &amp; Baseball......though, I may still like Alabama
> better on Saturdays........Roll Tide).

2009 Nov 17 09:49 AM

[4play2]

I am just happy to see the beginning of an adversitising campaign. While watching an NFL football game last Sunday, a well produced thirty second SiriusXM commercial came on. Wow, I said, finally. Advertising to football fans may be preaching to the choir but it is a great start.

2009 Nov 17 09:58 AM

[scots slant]

Scot's Slant here. The one thing that sticks in my mind from the above article is Karmazin's comment of SiriusXm buying back stock. With billions of shares floating around, that's what keeps share price low. In buying back shares, this should be a catalyst with a twofold effect: Less shares will drive the price up and lessens the possibility of a reverse split.

By the way, there is one more thing: I guess SiriDoom didn't factor in the possibility of SiriusXM buying stock back when he screamed that a reverse split was inevitable and Karmazin is a crook.

Oh, there is one more, one more thing: If Siri does position itself to buy back shares, we better strap our asses in for that E-ticket, rocket-ride to the top....

Scot's Slant

2009 Nov 17 10:25 AM

[R A F]

Keep in mind, Mel is sitting on a gold mine with his current employment contract and option grant, which were extended on 7/1/09. His base salary was increased from $1.25MM/YR to $1.5MM beginning 1/12010. He was granted options to buy 120 million shares at .43, vesting in equal installments 12/31/10; 12/31/11; 6/30/12; and 12/31/12. With SIRI now on its way to substantial gains into the future, there is no way Mel is walking away from any of this and his interests are definitely aligned with the shareholders - as are other senior executives of Sirius XM for much the same reasons, associated with favorable option grants.

On Nov 17 09:03 AM Erwin wrote:

> The interview reaffirms that Mel will never abandon his baby
> for money, and would never leave the company until successful and
> insures his reputation in the corporate business world.

2009 Nov 17 10:30 AM

[between the hedges_]

Oh lovely Pell, aka Siri Doom, I'm sure that you read this and weeped when you saw Mel himself discuss my option to avoid your much advocated R/S: BUY BACK SHARES!!!!! Read it and weep baby!!!

In a Fox News exclusive, Sirius XM Radio (SIRI) CEO Mel Karmazin sat down with Neil Cavuto to discuss the current Satellite Radio environment. Karmazin reiterated his position that Sirius XM is now a cash flow growth story as opposed to a subscriber growth story, as he described the newly merged Sirius XM Radio’s generation of positive free cash flow. He indicated that free cash flow is what will enable the company to pay down debt, buy back shares of its stock and make acquisitions.

2009 Nov 17 10:37 AM

[Spiderman4]

All I have to say is " WHERE IS SIRI- DOOM (cramer) " .............

2009 Nov 17 10:41 AM

[Satwaves]

video link here:

satwaves.com/blog/2009.../

2009 Nov 17 10:45 AM

[Pell]

I did and loved the interview but please read my comments above.

Remember Mel is the CEO not an analyst, but i loved the interview regardless. In fact I mentioned it would be good for all of us to see Mel more on the Media Circuit.

Not to sound sarcastic but since you did I will as well. I am buying a $2,000,000,000.00 home next week. Oh wait I need the money for it first.

Please read above comments before you make sarcastic remarks.


On Nov 17 10:37 AM between the hedges_ wrote:

> Oh lovely Pell, aka Siri Doom, I'm sure that you read this and weeped
> when you saw Mel himself discuss my option to avoid your much advocated
> R/S: BUY BACK SHARES!!!!! Read it and weep baby!!!
>
> In a Fox News exclusive, Sirius XM Radio (SIRI) CEO Mel Karmazin
> sat down with Neil Cavuto to discuss the current Satellite Radio
> environment. Karmazin reiterated his position that Sirius XM is now
> a cash flow growth story as opposed to a subscriber growth story,
> as he described the newly merged Sirius XM Radio’s generation of
> positive free cash flow. He indicated that free cash flow is what
> will enable the company to pay down debt, buy back shares of its
> stock and make acquisitions.

2009 Nov 17 10:57 AM

[between the hedges_]

Beautiful, Satwaves. Excellent. How is that Kiwi Injection feel Pell?

Satwaves: I really think that Mel could finish the shorts "finish him!" with a reality radio and trivia channel where the youth of America could call in and discuss their favorite reality TV shows and play trivia of all types.

Mel's creative staff may even be able to come up with their own reality music channel similar to American Idol on this channel. The twist would be that you can only listen to the voice, but not see the singer during the show! The listening audience could vote on the computer web page and at the end of the show see the winner on the web page.

They could call it Sirius Singer on the Reality Radio channel. The reality radio channel could also rebroadcast American Idol and have commentary on the other reality tv shows.

Finally, the reality radio/trivia channel could use the other air time to play sports, history etc trivia. You could create an interactive radio or play online. The teens, twenty and thirty somethings would eat it up.

2009 Nov 17 11:09 AM

[VicBC]

Not a bad interview, but Mel sure likes to throw ideas for the future out there without actually talking about what he will do to solve the current issues at hand, or even what options he is considering. I guess we will find out after the fact as usual and hopefully it does not require borrowing more money.

I think SIRI would be wise to do a commercial where they mention the hottest Christmas present of the year (Skydock), maybe with Oprah sittin in the car and doing a product demo to another celeb. Most people I know have no clue the product exists, and in the local paper I saw a product that was identical other than its lack of the Sat antenna. I bet they could sell oodles of this thing if people actually had a clue it existed and what features it has.

Sorry longs if I am sounding a bit negative here...I just don't like being in the dark, nor do I like to see lost potential. I think that if Mel were to clarify things a bit more, we might be a lot closer to a buck already.

2009 Nov 17 11:22 AM

[R A F]

By the way - regarding SkyDock: I was just catching up on some reading from last week and saw a fine writeup on this in The New York Times - Thursday, 11/12 - Business Section - Page B6 - Personal Tech Gadgetwise Highlights. Three hi-tech devices were featured, with full size photos and five paragraph descriptions, each - all very well done - and SkyDock was prominently displayed in this section. I think it is much too early for the naysayers to be coming to the conclusion that SkyDock will be "no big thing". This product was only introduced and launched a few weeks ago and it has already garnered awards and attention from the hi-tech crowd. I would bet that by mid 2010 these naysayers will have been run over by the reality of success of SkyDock. There is no doubt, in my opinion, that SkyDock and apps pertaining to the wireless/internet platforms will turn out to be significant contributors to revenue going forward.

2009 Nov 17 11:46 AM

[Pell]

On your side and I hope it does add to the bottom line.

From a trending standpoint what is your take on the last 2 days of negative trends on S/P. I am honestly asking for your opinion or anyone else.


On Nov 17 11:46 AM R A F wrote:

> By the way - regarding SkyDock: I was just catching up on some reading
> from last week and saw a fine writeup on this in The New York Times
> - Thursday, 11/12 - Business Section - Page B6 - Personal Tech Gadgetwise
> Highlights. Three hi-tech devices were featured, with full size photos
> and five paragraph descriptions, each - all very well done - and
> SkyDock was prominently displayed in this section. I think it is
> much too early for the naysayers to be coming to the conclusion that
> SkyDock will be "no big thing". This product was only introduced
> and launched a few weeks ago and it has already garnered awards and
> attention from the hi-tech crowd. I would bet that by mid 2010 these
> naysayers will have been run over by the reality of success of SkyDock.
> There is no doubt, in my opinion, that SkyDock and apps pertaining
> to the wireless/internet platforms will turn out to be significant
> contributors to revenue going forward.

2009 Nov 17 12:25 PM