Sirius XM chief: regular radio "sucks"
LOS ANGELES (Hollywood Reporter) - Mel Karmazin, trying to shore up Wall Street support for Sirius XM Radio, told analysts that regular radio "sucks" as an investment while the company he heads deserves more respect because of its growth prospects.
The CEO's message, delivered at a Merrill Lynch conference, seemed to fall on deaf ears Tuesday, though, and Sirius XM stock sank to a price not seen in more than five years.
Sirius XM shares fell 10% on Tuesday to $1.14 on the Nasdaq, their lowest point since May 21, 2003, when shares traded at $1.07.
Karmazin said the company will end 2008 with 19.5 million subscribers and will end 2009 with 21.5 million, guidance that fell short of some analysts predictions.
Karmazin, who called his guidance "very, very conservative," stressed that Sirius XM will show about 13% revenue growth next year compared with shrinkage of 3% for the traditional radio industry.
"The reason that radio sucks today, and the reason that most of you don't want to invest in it, is principally because the growth stopped," he said.
That, of course, is not the case with Sirius XM, he said, noting that Clear Channel Communications is the only radio company in the country generating more revenue than Sirius XM.
"And we know they're not growing," he said.
Investors also have been worried about a weak U.S. auto market because most new subscribers come with new car sales. Karmazin said that 17 million new cars sold in 2005 but only 14 million will sell this year, and that this year 45% of all new vehicles will come with a satellite radio and next year it will grow to 50%.
Sirius XM has suffered since the former companies, Sirius and XM, merged, partly because of heavy and expensive debt. But Karmazin said such worries might be overblown.
"I've been around when things were a lot worse," he said, noting that decades ago -- when he was a young radio executive -- interest rates were higher and price-to-earnings multiples for stocks were much lower.
Karmazin also said that a la carte pricing is coming to Sirius XM on October 6.
Reuters/Hollywood Reporter
