When Howard Stern announced in 2006 that the King of all Media would jump from his terrestrial radio perch to Sirius Satellite Radio (SIRI), his agent Don Buchwald said the shock jock was "truly excited to be working with SIRIUS, which will not only provide a new and innovative platform for his broadcast talents, but will draw on his skills as a businessman." Investors are starting to now believe that Stern really meant what he said.Speculation is mounting that Stern and his old friend Sirius CEO Mel Karmazin will work out a deal to keep the radio personality on satellite radio when his contract expires in January 2011. Though terrestrial radio wants him back, it's unlikely that companies would be willing to pay his current salary. He also would face the Federal Communications Commission restrictions that drove him from terrestrial radio in the first place.
"It's definitely more than a 50% chance that he stays," says Brett Harriss, an analyst with Gabelli & Co., which owns shares in Sirius. "He is not going anywhere."
The talk of Stern replacing Simon Cowell on American Idol is speculation masterfully fueled by Stern himself, who said he would take the job he won't be offered for $100 million. Gossip columnists are falling for it hook, line and sinker. Stern, who reportedly earns $100 million a year, does not seem the type who would take a pay cut.
Buchwald did not respond to an email request for comment nor did a Sirius spokesman.
Karmazin, ever the chatterbox, will no doubt field questions about Stern when Sirius reports fourth-quarter results on Thursday. The numbers will not be robust. Analysts expect the satellite radio shop to lose 2 cents. Revenue is expected to rise 6.6% to $663.26 million in the fourth quarter. Expectations for the current quarter are for Sirius to break even and for revenue to gain 16% to $679.01 million
Shares of Sirius, now Sirius XM Inc., have been on a tear -- gaining more than 750% over the past year. The stock of the New York-based company gained 82% since January, fueled by growing optimism about the company's prospects.
In January, the company delighted investors when it said that it expected to report more than $100 million in free cash flow in 2009, versus negative $552 million for 2008. It ended the year with 18,772,758 subscribers, adding 257,028 net subscribers in the fourth quarter.
The much-delayed Sirius-XM merger also helped the company's bottom line more than analysts expected. A $530 million loan from Liberty Media Corp. (LCAPA) saved the company from going bankrupt. Sentiment has sure changed since then. Most Wall Street analysts recommend buying the stock, which trades for $1.09, avoiding a potential delisting.
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