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Sirius XM Raises Guidance for the Rest of 2012, While CEO Mel Kamazin's Future Is Still Up in the Air


The company's stock is up after a good second quarter.

MINYANVILLE ORIGINAL Sirius XM (SIRI) jumped to an almost four-month high after it reported strong second-quarter earnings. The stock is up 3.64% to $2.28 in late afternoon trading.

The company reported second-quarter net income of $3.13 billion, or $0.48 per share, up from $179.4 million, or $0.3 per share, thanks to a $3 billion income tax gain. Revenue was up 12.5% from the first quarter to $837.5 million. Sirius now has a record high of 22.9 million subscribers, having added 622,000 new ones in the last quarter.

The jump in subscribers prompted Sirius to revise guidance for the year. The company now projects adjusted earnings before interest, taxes, depreciation, and amortization of about $900 million, an increase from the $875 million previously forecast. Revenue is now forecast to come in at $3.4 billion, versus the $3.3 billion projected in May.

The New York-based satellite radio company noted that its results were boosted by improving auto sales, with many new subscribers coming from sales of cars pre-installed with Sirius XM radios.

"Our increase in adjusted EBITDA guidance to approximately $900 million indicates strong confidence in our ability to continue to execute in the back half of the year," said Sirius CEO Mel Karmazin in a statement.

Sirius is currently locked in a battle with Liberty Media (LMCA) over the latter's plan to take over the former. Liberty Media, Sirius's largest investor, has a more than 46% stake in Sirius, and is awaiting approval from the Federal Communications Commission to take control of Sirius.

James Ratcliffe, an analyst at Barclays in New York, told Bloomberg that it is possible for Liberty CEO John Malone to execute a Reverse Morris Trust and spin off Sirius as a separate entity, which would enable Malone to escape paying capital gains taxes if he chooses to sell his Sirius shares.

Back in May, Karmazin had told the Sirius board that he had no interest in working for a controlling shareholder, a feeling he likely developed after his well-documented frustrations working under Sumner Redstone at Viacom (VIA). Thus, there had been industry speculation that Karmazin would leave Sirius should Malone and Liberty Media take over.

However, in an earnings call, Karmazin said that his employment was not a point of contention in take-over negotiations between the two companies.

"The board and I will deal with it," he said when asked about his term as CEO since his contract is up at the end of the year, adding that a decision will be made before Sirius reports third-quarter results.

As for how Liberty's take-over bid was going, Karmazin said, "Liberty has to decide what they want to do, and maybe they've done that already. They have not communicated that to us."

Twitter: @sterlingwong
No positions in stocks mentioned.
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