Sirius CEO: 'We Are Doing Everything Right'

Sirius XM Radio SIRI CEO Mel Karmazin knows the merger between the two satellite radio companies took too long, but it was worth the wait, he told Cramer Monday.

Some investors might disagree. The stock has performed poorly since the Federal Communications Commission blessed the deal. But Karmazin said he expects the share price to recover as the newly combined firm finds ways to unlock value for customers and shareholders alike.

“I can’t control the stock,” Karmazin said. “I can only control the company. And we are doing everything right.”

The CEO explained why SIRI took such a post-merger hit. His company needed $1.25 billion to complete the deal and went looking in the debt market for at least part of it. After raising $700 million, the final $500 million had to come from a convertible bond. Sirius needed that bond before the deal closed because the National Association of Broadcasters, an opponent of the merger, was expected to try to block the merger.

Karmazin admitted the money raising was “very ugly,” but, “We needed to close the merger.”

“Do I wish the market wasn’t that way when we closed it? Yeah. But what can I do? I could have closed or not closed,” he said. “I took the hand I was dealt.”

Sirius XM will be financing again in early 2009 to accommodate both XM and Sirius convertible bonds and bank debt. The company’s thinking, Karmazin said, is that “the sooner we put that issue behind us, people can focus on the fundamentals.”

While Cramer said most convertible bond arbitragers will be shorting SIRI stock to offset the potential for default on the company’s bond, the idea of a default is “ridiculous.”

“All we can do is to grow our free cash flow, get the stock to reflect our value,” Karmazin said, “and if we screw people along the way because they bet against us, that’s their business.”

Karmazin also urged investors to not listen to a recent negative Goldman Sachs analyst report. There are plenty of people on Wall Street that expect the company to outperform, he said.

Sirius XM will be holding conference calls after Labor Day so the market knows what to expect from the company for the rest of 2008 and 2009.




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