Thank Hugh for Nothing

It finally happened, and it's not much of a surprise. XM Satellite Radio (Nasdaq: XMSR  ) has announced that CEO Hugh Panero will be stepping down from his post next month.

Good luck, Panero. Don't let the swinging door of disappointment hit you on the way out.

When we were young
Panero's unceremonious exit is both forgettable and regrettable, but ultimately, it was inevitable. Things didn't start out so bad, though. As an XM co-founder, he helped make sure that XM hit the market well ahead of rival Sirius Satellite Radio (Nasdaq: SIRI  ) . His programming gains were a mixed bag, but he was able to land attractive partners while Sirius was still in waddling around in diapers.

But then Panero passed on trying to outbid Sirius for the services of Howard Stern. It was all downhill from there.

Nate Davis, who served on the company's board for years until he was tapped as chief operating officer last summer, will now step in to serve as interim CEO.

None of this is a shocker. Panero's voice has been curiously absent from corporate press releases since the company announced its proposed merger with Sirius five months ago. Chairman Gary Parsons has been the XM voice of choice lately, apparently the perfect setup man for Sirius CEO Mel Karmazin's scintillating spikes.

A Stern reminder
You may despise Stern's antics, but the numbers are indisputable. Despite its once significant lead over Sirius, XM has been losing market share with every passing quarter since Stern hit the Sirius airwaves six quarters ago.

Stern's arrival at Sirius coincided with a disastrous 2006 for XM. It lowered its year-end subscriber targets a few times, alienated board members, played hardball with its content providers, and coated its income statements with more red than a low-budget slasher flick.

Just call me Nostradamus
How can someone be such a visionary early on -- all the way down to nailing deals with all of the right automakers -- and then become so myopic just a couple of years later? In truth, had XM not agreed to merge with Sirius, Panero would have probably bolted under threat of mob attack much sooner. But the Sirius deal silenced critics, especially since XM was the one being bought at a premium in the agreement. XM critics, meanwhile, were getting their wish with a combination that would put Karmazin at the helm.

I mention this only because I nailed it in my "4 CEOs to Go in 2007" article. Back in December, I singled out four corporate chieftains who were cruising for a swift kick out of the board room:

  • Kevin Rollins at Dell (Nasdaq: DELL  )
  • Hugh Panero
  • Paul Pressler at Gap (NYSE: GPS  )
  • Terry Semel at Yahoo! (Nasdaq: YHOO  )

Pretty good call, huh? Pressler was given the specialty retail kiss-off a month after I wrote my article. Michael Dell came back to replace Rollins a few days after that. That appeared to be it, but then Terry Semel stepped down last month, and now it's Panero's turn to meet murky fate of my crystal ball.

Panero lasted the longest of the four, but XM is probably the company with the biggest need for change at the top. Some would argue that change at this point is irrelevant, of course. In a few months, XM will be Karmazin's problem or opportunity, as long as the merger clears some tricky FCC hurdles. Even designating Davis as "interim" CEO -- with no plans likely for a search party -- is part of the cocky assumption that the two companies will be allowed to wed.

That would be a mistake. I believe that the companies improved their chances for a merger by committing to cheaper alternative subscription plans this week, but there are way too many graying geezers in Washington with a lot of regulatory pull and very little new-media know-how. They can't tell an iPod earbud from a hearing aid. They're also the ones who can't grasp that although Sirius and XM may have been a duopoly a few years ago, they're not now. There are too many premium aural-entertainment consumption appliances out there.

XM needs a Plan B if the deal does fall through. Davis has yet to prove himself unworthy, so we may as well give him a shot. As for Panero, Rollins, Pressler, and Semel -- they're not going away empty-handed. If their golden parachutes don't pay the bills, they can always sell the film rights to The Ex-CEOs Club.

Rick recommended XM toRule Breakers subscribers in 2005, but the position was liquidated last year. A 30-day free trial subscription is available if you want to read up on the active recommendations.

Dell, Gap, and Yahoo! are Motley Fool Stock Advisor newsletter picks. Dell and Gap are alsoMotley Fool Inside Value picks.   

Longtime Fool contributor Rick Munarriz is a Sirius and XM subscriber but he does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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