Sirius XM: Can Meyer Fill Mel's Shoes?

| About: Sirius XM (SIRI)
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Sirius XM (NASDAQ:SIRI) has been in the news almost every day recently. But today's story is very exciting for Sirius Bulls. James E. Meyer has been appointed CEO of Sirius on an interim basis, effective immediately. Mr. Meyer is currently Sirius XM's President of Sales and Operations. He will replace Mel Karmazin, who will not be renewing his contract with the company. Mr. Meyer will also join the Sirius Board of Directors:

"I'm honored to lead Sirius XM during this important time for our Company," said Mr. Meyer. "Sirius XM is a great business and I look forward to working with our talented management team to continue to deliver the best content and service to our subscribers, while enhancing value to our shareholders."

As many of you already know, the Sirius XM Board formed a search committee in October, led by Greg Maffei of Liberty Media (LMCA), that includes James Mooney and Eddy Hartenstein, to consider both internal and external candidates to be the next Chief Executive Officer of Sirius. This search includes internal candidate Meyer.

In October, when Karmazin announced that he would be leaving the company, many investors were very upset. They were afraid that it would be very hard to replace him. The shares fell from a high of $2.97 down to $2.74:

Oct 31, 2012 2.84 2.84 2.74 2.80 60,666,300 2.75
Oct 26, 2012 2.85 2.89 2.81 2.82 73,283,100 2.77
Oct 25, 2012 2.92 2.92 2.79 2.85 101,791,900 2.80
Oct 24, 2012 2.85 2.93 2.84 2.89 82,832,400 2.84
Oct 23, 2012 2.88 2.88 2.80 2.87 47,708,900 2.82
Oct 22, 2012 2.94 2.95 2.85 2.91 73,920,800 2.86
Oct 19, 2012 2.95 2.97 2.88 2.92 137,924,800 2.87

Over the last several years, Karmazin has brought the stock from a low of ten cents a share to a multi-year high yesterday of $3.01. This is a gain of over 2900%. I have recevied comments from many investors on Seeking Alpha who bought thousands (and hundreds of thousands) of shares back in 2009 due to their confidence in the guy who everyone loves to call Mel. The company has gone from a relatively unknown entity to the largest radio company in the world. It is now a household name with over 24 million active subscribers.

Chart forSIRIUS XM Radio Inc.

Seventy percent of all new cars now come standard with Sirius XM radios. And that number is going up everyday. There are the 2.0 portable internet/satellite combo radios, as well as hundreds of thousands of smartphones which now have Sirius XM 2.20 Apps that allow program playbacks and more. Almost everyday press releases from Sirius offer listeners exceptional new programs about everything from Talk Shows and Music to Sports. And the company is due to debut its new "personalized radio" any time now.

But James Meyer has been right by Karmazin's side the entire time. He joined Sirius in May, 2004, before Mel came on board in November of that same year. Even though he will be serving as interim CEO, chatter on the financial sites already had him pegged as the front runner for the permanent job. I am sure that longtime Sirius investors will be pulling for Meyer. Sirius XM Chairman of the Board Eddy Hartenstein summed it up best:

"In Jim we have a highly qualified leader and operator," said Hartenstein. "Jim has been an integral part of Sirius XM for eight years and his extensive knowledge of Sirius XM's business and significant industry experience are a great asset. Thanks to Mel Karmazin's leadership, strategic vision and operating focus, Sirius XM is poised for a continuation of the results and performance investors have come to expect."

He went on to add that due to Meyer's current position at the company, this will be a seamless transition. One of the keys to the success of Sirius has been the ability to "sell" to the automakers. And since this is also Meyer's specialty, he will be an excellent fit. Actually, he will also be a lot cheaper, depending on his bonus. According to an SEC filing this morning:

Mr. Meyer shall receive a base salary of $1,300,000 per year, and annual bonuses in an amount to be determined by the compensation committee of our board of directors. The amendment also: extends the term of his agreement to October 31, 2013; changes the date that Mr. Meyer may elect to retire to October 2013; and provides that if Mr. Meyer's employment terminates after another person is appointed as our chief executive officer, then Mr. Meyer will be entitled to an additional bonus...

The filing goes on to say that Karmazin resigned yesterday, December 18. His total compensation for 2011 was almost $10 million with bonuses. That amount will be much higher for 2012 due to stock options which he cashed in for more than $200 million. Will this be for retirement, or seed money for a new venture? Whichever, I want to wish the best of luck to both of these men who have built Sirius into what it is today. If this news has any affect on the stock at all, it will be positive. This removes a lot of the uncertainty.

However this is not a slam dunk. This is more of a "throw it at the wall and see if it sticks." As I mentioned Meyer has been a top front runner for the job. But the search committee is still actively looking for a permanent CEO. The SEC filing shows that this agreement is only good through October 31, and it has a loophole that will allow it to be changed sooner, if another candidate is found to be more suitable. Ultimately though, if Meyer is successful he will become the new CEO. So let's hope that it sticks. The stock fell to $2.90 on the news, but has since recovered on huge volume. The Big Money likes this.

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.