Sirius XM Is the King of All Lawsuits

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Howard Stern may be the self-proclaimed "king of all media," but his monarchy apparently doesn't extend into the courtroom.

The radio host celebrity's lawsuit again Sirius XM Radio (NAS: SIRI) is being dismissed by Justice Barbara Kapnick of the New York State Supreme Court.

Stern's legal battle began shortly after Sirius completed its merger with XM. Stern's original contract calls for stock awards based on the number of incremental subscribers acquired after his arrival, and his camp wanted a piece of the XM count.


It isn't a surprise to see Sirius XM -- and its shareholders -- come out on top. Why should Stern receive stock bonuses based on the number of XM subscribers? They don't even have access to Stern's show on XM unless they're willing to pay a premium for a "best of" package. One can even argue that many XM accounts are there to avoid Stern on Sirius, though it usually just boils down to whatever receiver is installed in your car.

If anything, it may even be embarrassing that XM had more subscribers than Sirius at the time of the merger. Would that mean that Stern's appeal is overrated?

We can't, however, ignore Stern's side of the story. If Stern doesn't come to Sirius -- which was originally charging 30% more per month than XM -- this would never have been a "merger of equals" where Sirius winds up with executive control of the company. It would've been XMSirius, and someone other than CEO Mel Karmazin would likely be at the helm.

Shareholders are catching a break here. Any stock award would've been dilutive to a company that already has more than 6.5 billion shares outstanding, once we factor in Liberty Media's (NAS: LMCA) 40% preferred share stake.

The only problem now may be a matter of Stern's satisfaction with Sirius XM. Love him or hate him, he's as influential as he is vocal. He already says he plans to appeal the decision. His celebrity status is likely to grow when he joins the judges on America's Got Talent -- airing on Comcast's (NAS: CMCSK) NBC -- next month. He has three years and change left on what should be his final contract with Sirius XM, and the last thing the satellite radio operator needs now is its most magnetic celebrity knocking the company on its own airwaves in a year in which it's already projecting decelerating subscriber growth.

Sirius XM's stock opened higher on the news, but this isn't the end of the story.

Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.

XM Satellite Radio was a Rule Breakers recommendation before the Sirius XM merger. It's now gone from the scorecard, but if you want to discover the newsletter service's next Rule-Breaking multibagger, a free report reveals all.

At the time this article was published The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Liberty Media. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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