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Sirius Names Karmazin CEO, Shares Jump
November 18, 2004
By Sue Zeidler
LOS ANGELES (Reuters) - Sirius Satellite Radio Inc. (Nasdaq:SIRI - news) on Thursday named former Viacom Inc. President Mel Karmazin as its chief executive, in the latest migration of a mainstream radio heavyweight to the fledgling satellite industry.
New York-based Sirius said current CEO Joseph Clayton would remain chairman as radio veteran Karmazin takes the helm of a company already buoyed by its recent deal to bring aboard one of Karmazin's biggest former talents at Viacom, ribald radio host Howard Stern.
Karmazin, who was Stern's longtime benefactor and supporter at Viacom, left his post as president and chief operating officer of Viacom in June in a management shake-up of the media conglomerate.
Shares of Sirius rose over 20 percent in after-hours trade on Karmazin's appointment, hitting $5.75 from a Nasdaq close of $4.72.
Analysts hailed the appointment, particularly due to recent concerns about Sirius' heavy spending for promotion and content deals, including its $500 million agreement with Stern.
"We think Karmazin is an outstanding leader and exactly what Sirius needed. Karmazin keeps a keen eye on expenses, and he's also an outstanding salesman and promoter," said Kit Spring, analyst with Stifel, Nicolaus and Co. Inc.
Stern is due to quit Viacom Inc.'s (NYSE:VIAB - news) Infinity Broadcasting and move his daily radio program to Sirius in January 2006, though speculation has persisted for weeks that his Viacom contract may be bought out sooner.
During an interview, Karmazin said he believed Sirius would not want to interfere with Stern's obligation.
"As I understand it, he has a contract with Viacom that goes through the end of 2005 and we certainly would not interfere with a contractual relationship. We think contracts are made to be honored," Karmazin told Reuters.
DREAM TEAM
Karmazin, who got his start in radio ad sales, said he was contacted by Sirius' board about joining the company about a week after Stern's announcement on Oct. 6.
"This is the dream team getting back together. Stern and Karmazin were incredibly successful at Infinity and can help give Sirius market momentum," Spring added. "He's going to drive the company's ability to promote Sirius -- the one thing Sirius suffers is a lack of brand awareness."
Indeed, Karmazin's appointment came as Stern went on a promotional blitz for Sirius, handing out free subscriptions at a rally in New York and appearing on the CBS "Late Show with David Letterman" to explain his upcoming move as having grown out of frustrations over censorship of his current show.
"My show is like Swiss cheese when I'm done with it every day," Stern said. "I don't even know how people listen any more."
Karmazin built one of the nation's top radio chains, ran CBS and then became a Wall Street media darling due to his dedication to shareholder value.
He was once the designated successor to Viacom CEO Sumner Redstone, but in March 2003, he signed a new contract that stripped him of automatic succession to CEO and gave Redstone more operational control and authority to overrule Karmazin.
Karmazin was lately considered a would-be candidate to succeed Walt Disney Co.'s (NYSE:DIS - news) CEO Michael Eisner, but on Thursday, he said that Sirius was a natural fit.
Karmazin said he planned to buy an undisclosed amount of Sirius shares. "This company is heading in the right direction. We're going to reduce the subscriber acquisition costs, work more with the automotive industry, generate more revenue and generate a ton of profits," Karmazin said.
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