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?
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Pandora Media. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.