Will Microsoft or Sirius XM Buy Pandora?

One of the juiciest rumors that surfaced when Pandora (NYSE: P  ) began its search for a new CEO several months ago, was that Sirius XM Radio's (NASDAQ: SIRI  ) former CEO Mel Karmazin would be tapped as the leading streaming service's new helmsman.

That chatter never made sense outside of fantasy boardroom leagues -- if there ever was such a thing -- and for now, the point is moot. Pandora tapped a former Microsoft (NASDAQ: MSFT  ) executive to lead the company into the new age of profit potential, royalty negotiations, and big-tech competition.

New CEO Brian McAndrews was the CEO of aQuantive, an online marketer that was eventually gobbled up by Microsoft in a $6-billion deal. He then went on to head up Microsoft's online advertising division until leaving the software giant in 2009. 

It's an intriguing hire. McAndrews isn't the terrestrial radio guru that Karmazin was before winding up at Sirius XM. His specialty has been digital marketing. Then again, this is exactly what Pandora needs. The 71.2 million active listeners who streamed 1.35 billion hours of content last month aren't there for the programming. Pandora's a technology-driven company that serves up millions of tunes based on a proven platform that serves up personalized playlists. It doesn't need Karmazin to woo Howard Stern or Martha Stewart over. It just needs to monetize its costly bandwidth and licensing fees through advertising. In that sense, McAndrews is perfect for the job.

However, just as he built up aQuantive, only to hand it over to Microsoft for billions, could this be a prelude to a Microsoft buyout?

It's a coincidence, sure, but wouldn't Pandora look perfect on Microsoft's arm? Microsoft rolled out Xbox Music a year ago, and it beefed up the platform over the weekend by announcing access on iOS and Android devices. However, Microsoft would go from being a fledgling player in what is about to become a very crowded niche, to the king of the hill with Pandora in its arsenal.

We also can't dismiss Sirius XM as a potential buyer.

It's far less likely, though. Sirius XM is investing its cash flow in buybacks, and it already announced a beefy acquisition this summer to have some more skin in telematics. However, Sirius XM would be the king of all growing audio media if it operated the satellite radio monopoly and the top dog in streaming. 

For now, it's highly unlikely that Pandora and its investors would even pursue an exit strategy. The stock's trading within loose change of another two-year high, and any purchase would have to take place at a stiff premium to the stock's already lofty valuation. Then again, we know that Microsoft has a habit of overpaying for acquisitions. It did exactly that the first time it shook hands with McAndrews.

Is the market ready for a sequel?

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 13, 2013, at 6:16 AM, edwardstewart wrote:

    It is absolutely nuts for Siri to even consider a buy of P, and only talking heads like you pretend that is even a possible issue for clicks.

    P can be trampled on by any upstart or large internet company looking to enter the stage of internet streaming.

    It has been more than 10 years and no one has figured out yet how to make net streaming music profitable. While, over the same approximate time siri has gained millions of paying subscribers.

    The only thing P and Siri have in common is they play music. The delivery system and the additional content make them nearly 2 completely different animals.

    If you were talking about Sirius or XM buying one or the other (as they did) your blovination here may be valid.

    You sir are headed down the same road as Rocco. Your pieces may be exciting to you for now but it's a short lived road my friend.

  • Report this Comment On September 13, 2013, at 9:53 AM, CaribouPaku wrote:

    Rick, anything is possible just as Sirius added a microsoft executive to its board, Anthony Bates, could we see a double whammy like Sirius buy out of Pandora and Microsoft taking control of Sirius. This is the link of the executives that were added to Sirius's board.

    http://finance.yahoo.com/news/sirius-xm-adds-executives-espn...

    The talk is that Malone may be willing to sell off some of its siri shares or use them as financing of his purchase of a additional cable company? Anything may be possible????

  • Report this Comment On September 13, 2013, at 11:41 AM, Barbara323 wrote:

    This appears to be nothing more than an over-hyped short squeeze to cause the pop. After the announcement of the new CEO, S&P repeated its strong sell warning (which was ignored by traders who were probably overcompensating for their short positions). This current share price is also not justified given the forthcoming competitive products by Apple which are rumored/estimated to cut into half of Pandora's client base.

    Finally, this current share price is not justified in that McAndrews effectively did not do well in that his last electronic advertising venture which he sold to Microsoft resulted in a huge loss. See link for article. http://money.cnn.com/2012/07/02/technology/microsoft-aquanti...

    Based on the fact that Microsoft was already sold a lemon once by McAndrews, I would certainly hope/trust that neither the Microsoft board nor its current investors would consider merging with Pandora. Fool me (Microsoft) once, shame on you (McAndrews). Fool me (Microsoft) twice, shame on me (Microsoft).

  • Report this Comment On September 16, 2013, at 6:06 PM, Barbara323 wrote:

    You should have examined competent warnings by people who actually research CEOs before buying into hype. I feel sorry for anyone who continued to invest in this company based on your article when it was clearly nothing more than a short squeeze situation.

    This article nor your article of today are worthy of consideration. Pandora now down 4% due to incompetent decisions of a novice CEO with a poor track record. It has 35% downward more to go per the S&P, which I personally take credence in. In sum, listen to the true analysts and avoid/sell this stock.

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