Sirius XM Radio (Nasdaq: SIRI) chairman Gary Parsons resigned from the company last week. Is CEO Mel Karmazin the next to go?
During a Fox News interview with Neil Cavuto, the charismatic chieftain of satellite radio's shining star on Fox News was asked about leading the way for the inevitable hookup of Comcast (Nasdaq: CMCSA) with General Electric's (NYSE: GE) majority-owned NBC Universal.
Cavuto pointed out that Karmazin is one of the few names rumored to be considered for heading up the new NBC. Karmazin shot the notion down, but not before patting himself on the back.
"There would be no question that I would be perfect to run it," he told Cavuto. "There is no chance that I will ever take another job outside of Sirius XM. I just renewed my contract. It's exactly what I want."
Pressing on, Cavuto suggested that Karmazin wouldn't take the gig because it would mean answering to Comcast CEO Brian Roberts. Karmazin agreed. After working his way up at Viacom (NYSE: VIA), he has no interest in playing second fiddle at any company.
"I wouldn't be a No. 2 to Warren Buffett," he said, hammering the point home. If working under the greatest investor of our time at Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) isn't enough to sway him, it's just not going to happen anywhere.
"I don't want to run another large media company," he said later.
Birth of a baseless rumor
How can an adamant refusal be interpreted as a mixed message? Well, suggesting that he would be "perfect" to run the new NBC is enough to raise a few eyebrows. There has to be some degree of skepticism when you preface a denial with a little campaigning. Belittling the hierarchy also leads one to wonder whether he would be open to the position if it came with complete autonomy.
Is he really "perfect" for the job, though? A stock chart would woefully disagree.
Karmazin joined Sirius five years ago, when the stock was trading at $4.72. It's trading 86% lower today. Adding insult to injury, Karmazin has dug into his own pockets to buy shares at much higher price points. These moves burned investors who followed Karmazin into the shares, under the assumption that the insider buying was a sign of confidence.
There is also the reality that advertising revenue -- on an absolute and per-subscriber basis -- has been shrinking in recent quarters. Karmazin was a rock star for terrestrial radio. Shouldn't the non-music Sirius and XM channels that play commercials and the sponsorship opportunities improve under his watch?
In Karmazin's defense, those are essentially the only two knocks on his stewardship. He came on board after Howard Stern signed up, so you can't blame him for the escalating programming costs. Besides, if Stern hadn't come to Sirius, XM probably would have acquired Sirius instead of becoming part of a merger that has Sirius calling all of the shots.
Drag me to Mel
If Sirius XM's close of nearly $0.65 a share last night seems like a pittance, consider that the stock was trading as low as $0.05 a share back in February -- when it seemed as if the first of many debt repayment hurdles would catapult the company into bankruptcy reorganization.
It wasn't a pretty deal that Karmazin inked with Liberty Media Capital (Nasdaq: LCAPA) to stay afloat, but it worked. The company is delivering nothing but good news these days, as breakeven quarterly results and a Standard & Poor's credit-rating upgrade are shining kindly on the satellite-radio giant.
It still isn't a cakewalk from here, and that's exactly why Karmazin isn't going anywhere. There is a challenge before him to build on the company's positive operating cash flow today and grow in relevance tomorrow. He has lived through the worst of times. The last thing his pride could put up with is dealing with a new CEO who would reap the harvest.
Besides, where would Karmazin go at this point? Terrestrial radio is fading away, and even a television-broadcasting heavyweight such as NBC faces a future of stagnancy as video follows radio's downward spiral.
He may be "perfect" for many other jobs, but he's also "perfect" for the gig he has now.
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