Is Mel Karmazin the only one buying shares of Sirius XM Radio (NASDAQ:SIRI) these days?

The company's CEO stepped in to buy 2 million shares yesterday, taking advantage of a historically low price for the satellite radio provider. At an average price of $1.3732 a share, Karmazin is adding to his stake at a price point that hasn't been seen since May of 2003.

Insider buying is typically an encouraging sign. If a CEO is willing to fork over real money for real shares, it's seen as a show of confidence. Unfortunately for Karmazin, yesterday's move is actually him just averaging down in his position.

See, Karmazin snapped up 1.5 million shares of Sirius -- at $5.36 apiece -- shortly after he was brought on as CEO in 2004. Two years later, he nibbled at another million shares when the stock was at $6.20. He actually spent more than twice as much in each of those transactions than he invested in Sirius this week. Perhaps more importantly, it shows that Karmazin may be a brilliant radio guy, but he's no Wall Street Nostradamus.

It's all about the karma, Zen
Karmazin is in a better place than most people think. He pulled off a merger that few figured would be possible a year ago. A similar hookup between DirecTV (NYSE:DTV) and DISH Network (NASDAQ:DISH) was shot down by regulators in 2002.

Sirius topped the 6-million-subscriber mark just weeks before the deal was announced in February of 2007. Karmazin now watches over a user base that has tripled, partly as a result of the organic growth at Sirius but mostly because of the absorption of the larger XM into its bloodstream.

In terms of value, the combined company today commands a smaller market cap than either Sirius or XM when the merger plans were made public.

A roughed-up share price is often a death knell for those at the helm, but you don't see any Karmazin dolls burning in effigy. Mr. Market is giving the guy a break. The stock may have shed 85% of its value since peaking shortly after Karmazin's arrival, but investors are willing to be patient. It's the FCC that is walking away with a black eye after delaying the deal this long. Wall Street is going to cut Karmazin some slack over the next few quarters to see how the synergies play themselves out.

The ups and downs of following the lead
Cynics will point to Karmazin's earlier purchases as signs that yesterday's buy doesn't matter. Karmazin may know the inner workings of Sirius better than any lay investor, but he doesn't know the lay investor any better than you or me.

The lone satellite radio provider's stock isn't trading at a five-year low by accident. The market feels that even with more than 18 million subscribers, Sirius is going to have a tough time delivering impressive financials.

I'm not in that camp. We haven't seen what Karmazin is capable of with an easel this big. His company's marketing has been tactfully subdued as they tried to grease the merger through. Now it's time for Sirius to shout out its unified message and invest in the products that will allow one receiver to play all of the XM and Sirius channels.

The competitive challenges are real. I have never felt that Apple's (NASDAQ:AAPL) iPod poses much of a threat to Sirius. It replaces the CD collection, not live radio. Compact disc players and terrestrial radio have co-existed harmoniously for more than two decades now. The real Apple threat to Sirius is the iPhone.

Some of the most popular free apps that can be downloaded to iPhones include Pandora, Time Warner's (NYSE:TWX) AOL Radio, and CBS's (NYSE:CBS) Last.fm. All three offer Web-based Internet radio stations and music discovery programming that can be played even when you're not tethered to a Wi-Fi connection. The threat is real, but this will also keep Sirius honest in making sure that it delivers the top-notch programming people are willing to pay for.

As for shares of Sirius, Karmazin certainly hopes that people will be willing to pay up for those too.

Maybe this time, he'll be right.

Here are some other recent stories on XM’s long courtship with Sirius:

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Longtime Fool contributor Rick Munarriz is such a big satellite radio fan that he subscribes to both XM and Sirius. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.