Howard Stern Loses Appeal, But Does Sirius XM Win in the End?
Give shock jock Howard Stern credit. Despite a five-year deal worth $500 million, Stern felt he was owed another $330 million in stock bonuses from Sirius XM (NASDAQ: SIRI) – and went to court over it.
Stern had claimed that Sirius should count subscribers to the former XM Satellite Radio, which merged with Sirius in 2008, as well as its own subscribers in calculating performance-based awards for Stern and his production company, One Twelve Inc.
Unfortunately for Stern, Reuters reported Thursday that a New York state appeals court didn’t see things his way. Again. The New York court affirmed a trial judge's ruling from last year that Stern's 2004 contract was "unambiguous" and that Stern was not owed any additional money.
Stern’s highly publicized move to Sirius in 2006 was a win-win for both the company and for Stern. This gave Perez Hilton pause to ask an important question: How smart was it for Sirius to deny Stern in the first place?
Stern accounted for a big chunk of Sirius subscribers and if he continues to feel disrespected, how long before he jumps ship? Hilton pointed out that Stern’s gig as a judge on America's Got Talent has given him renewed faith in his TV appeal and that it’s not as if Stern would have no other options if he quit the satellite radio network.
On the other hand, not everyone is a fan of Howard. Michael Scott of MadMikesAmerica.com is one of several who have become disenfranchised with Stern – claiming, among other things, that his shows on Sirius are either repeats or “lacking spark.” Scott has urged Sirius XM new CEO, Jim Meyer, to get rid of Stern and replace him with fresh talent.
Sirius itself has been in the news in recent months, thanks to its wide-ranging agreement with major automakers such as Ford (NYSE: F), General Motors (NYSE: GM), and Toyota (NYSE: TM) to enable their vehicles with Sirius satellite technology. With the recent surge in car sales, analysts expect Sirius to get in on the action.
The Wall Street Journal reported that of 16 analysts it tracks, nine rate Sirius XM a BUY, two OVERWEIGHT, four HOLD, and only one SELL. The current average recommendation is OVERWEIGHT.
While Sirius XM can tip its hat to Stern for some of the two million net subscribers added last year, the primary driver was improved auto sales and the company’s push into the used-car market, according to Forbes.
Forbes expects the total subscriber base to grow past 35 million citing the fact that the company has been able to beat its own subscriber guidance on a consistent basis.
Sirius XM shares were selling at $3.05, down less than 1 percent in late morning trading Monday.
At the time of this writing, Jim Probasco had no position in the above-mentioned equities.
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