Will Mel Karmazin Stay At Sirius?

Mel Karmazin is 62 or 63 years old. Sirius (SIRI), where he is the CEO, pays him fairly well. His base salary in the last proxy was $1,250,000, and his bonus for the year was $2,200,000. Mr. Karmazin was also the beneficial owner of over 11.5 million shares when the proxy was filed.

But, Mel Karmazin is already extremely wealthy. He sold Infinity Broadcasting, where he was a large shareholder, to Westinghouse, then the parent of CBS (CBS). He eventually become president of the CBS parent, working for nut job Sumner Redstone. That got a bit old and Mr. Karmazin left.

Karmazin joined Sirius (SIRI) in November 2004. The stock moved over $9 the following month. It now trades well below $4.

Shareholders would not like to see Karmazin go. He is widely respected as a media executive and on Wall St. The problems at Sirius are considered part of the structure of the media delivery industry more than poor management.

But, Karmazin is clearly pushing for a merger with rival XM (XMSR). Such a merger would certainly allow for sharp cost reductions at the combined company and the possibility of raising prices once there is one company in the market and not two. But, that is the trouble. The FCC has made casual comments that a merger might well be blocked by the government. No monopolies.

If a merger is not a realistic possibility, XM and Sirius may simply continue to lose market value until a company outside the industry buys one or the other. There are regulatory issues there as well, but it is not beyond the realm that a company like Toyota (TM) might want to pick up one of the firms.

Any transaction that leaves Mr. Karmazin out of the CEO seat, it is likely to send him on the road to new possibilities. And, if he sees the writing on the wall today, he may already have considered life after Sirius.

He would make a hell of a senior partner at a private equity firm. Blackstone or KKR would probably buy him almost any media company he wants. It’s not like they don’t have the money.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.