Is Mel Staying Or Leaving Sirius XM?

| About: Sirius XM (SIRI)

Is Sirius XM (NASDAQ:SIRI) CEO Mel Karmazin leaving the company? That seems to be one of the more popular subjects lately, and there is no shortage of opinion. As a writer with a website dedicated to satellite radio, I oft get emails from people expressing opinions on the subject. Some love Mel Karmazin and some do not. Thus, no matter what happens with Karmazin, there will be people that are not happy with the result.

While the discussion of Karmazin's fate seems relatively fresh, it has been discussed for quite some time now. There has been public posturing, reports that Karmazin is underpaid, reports that he is expensive, and just about everything in between. Karmazin's contract is up at the end of this year.

In speaking at the Goldman Sachs Media Conference Liberty Media's (LMCA) Greg Maffei stated that Sirius XM could run fine with or without Karmazin at the helm. In complimenting Karmazin, Maffei stated that Karmazin is valuable. In putting perspective to that compliment Maffei also stated that Karmazin is not irreplaceable.

Liberty Media is only a few very small steps away from taking control of Sirius XM. While Liberty could act to replace the current Board of Directors, and themselves make the determination of Karmazin's fate, the task will likely fall to the current Board.

Karmazin has stated publicly that he is not yet entertaining discussions about his contract. He wants a clear separation from the actions of Liberty and control and his employment status. The CEO has stated that he does not even want the appearance of impropriety and that his status as CEO, or remaining in that position, has no connection with any dealings with Liberty Media.

While a shake-up at the helm of Sirius XM may be a bit of a cloud of uncertainty, the street does not seem overly concerned with who is running Sirius XM. Certainly Karmazin brings a level of cache to Sirius XM, but John Malone and Greg Maffei are not slouches in the cache category either. Clearly a Sirius XM without Karmazin will still perform well, add free cash flow, add EBITDA, and add subscribers. Simply stated, the model works.

There are a few considerations, or perhaps nuances that investors may want to consider. Karmazin is a master at delivering good metrics on a quarterly basis. He has his finger on the pulse of the company every day. Malone has stated that Karmazin may be more short-sighted than he would like. Malone is more of a visionary. A Sirius XM without Karmazin could sacrifice some short term value in favor of longer term value. It is simply something worth keeping in the back of your head.

For investors, this issue will likely be playing out over the next two months. By the time Sirius XM reports its Q3 numbers, we should know the status of Karmazin. In my opinion, even if he is leaving, he will stay on for a transitional period. If that happens, investors can have confidence that the transition in control will be smother than without him.

Disclosure: I am long SIRI, LMCA. 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.

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