Interoperable Radios and Executive Candor, a look back.
All this talk of interoperability and lack of candor has really got me upset. As a shareholder, I am concerned. So I decided to look into the company's annual reports dating back to 2003, when I first invested in sirius stock. These reports are for investors. They are filled with all the facts an investor needs to decide to buy, sell or hold. Making the right choice is up to the individual. There have been allegations of wrong-doing by many organizations with regard to this issue. The facts do not support their argument.
The 2003 annual report states: "On February 16, 2000, we signed an agreement with XM Radio, the holder of the other FCC license to provide a satellite-based digital audio radio service, to develop a unified standard for satellite radios to enable consumers to purchase one radio capable of receiving both SIRIUS and XM Radio's services. We expect the unified standard to detail the technology to be employed by manufacturers of such dual-mode radios. The technology relating to this unified standard will be jointly developed, funded and owned by the two companies. In addition, we are working with XM Radio to promote adoption of the new standard by creating a service mark for satellite radio. This unified standard is also intended to meet FCC rules that require interoperability of both licensed satellite radio systems. We anticipate that it will take several years to develop radios capable of receiving both services.
Similar wording appears in 2004. "to be employed by manufacturers" this means built, marketed and sold by radio manufacturers. Not Sirius. Not xm. Acknowledgement is made that it will be several years before interoperability is realized.
In 2005, the annual report states the following: We believe that this agreement, and our efforts with XM Radio to develop this unified standard for satellite radios, satisfies the interoperability condition contained in our FCC license, although the FCC has not addressed this issue. We notified the FCC of this agreement in 2000, and asked the FCC to concur that our efforts to develop this unified standard satisfied the conditions to our license. In January 2005, the FCC asked us and XM Radio to provide a written update regarding the status of developing interoperable receivers and the time frame for making interoperable receivers available to the public. We are in the process of preparing a response to this request.
Which brings us to the 2006 annual report, in which sirius states : "...We expect the unified standard to detail the technology to be employed by manufacturers of such dual-mode radios, although we have no assurances that any manufacturer will build, or that a market will develop, for such dual-mode radios....In 2005, we substantially completed the design of a radio capable of receiving both services.
As far as this investor is concerned....VOILA! FCC mandate met! The 2007 and 2008 annual reports go on to state that the company believes the mandate to have been acheived. Here's the monkey wrench in all of it. The lack of candor seems to be pointing at Mel Karmazin.
Now mel started in november 2004 so for all intents and purposes, he really began in 2005. Sometime in 2005 they completed the interoperable radio as reported in the 2006 annual report. Sirius announced the merger with xm in febuary of 2007. Meetings would have been going on since 2006. So Mel Karmazin had about a 1 year window to get this interoperable radio on the market assuming you believe that it was his responsibility. It was not. Sirius met their responsibility to the FCC and to shareholders.
For those of us who have been around a while, we understand that the launch of satellite radio was not an easy task. Money was the first problem. The second was not enough chipsets available in the beginning years which created a shortage of radios. Demand outstripped supply. This is an overlooked fact. The companies couldn't get enough radios on the shelves to meet demand, much less finance the production of radios that might never have gotten them a single subscriber. The question we all asked ourselves each Christmas was "are there going to be enough radios?" As I stated....the mandate was met.
Back to Mel for a moment. When he took over the reigns of sirius he had a resonsibility to shareholders. Joseph Clayton, the former CEO was a spendthrift who would issue more and more shares on a whim...you always knew when a mega Stern type deal was coming! Mels priority, and rightfully so, so to trim the fat....something various members of Congress could learn from. Under Mel, sirius has cut costs and increased revenue. No one complained when he under promised and over delivered by beating street expectations.
Now a farce has been created to destroy the merger, claiming it was the companies responsibility themselves to deploy interoperable radios. I would much rather as an investor see profitability before interoperability. I think most investors would agree. The companies have acted in good faith to the FCC and the shareholders. It's time the FCC put an end to the nonsense and approve the merger.
(linked article at www.siriusnewsrumors.blogspot.com)