One of the juiciest rumors that surfaced when Pandora Media Inc (NYSE:P) began its search for a new CEO several months ago, was that Sirius XM Radio Inc (NASDAQ:SIRI)‘s former CEO Mel Karmazin would be tapped as the leading streaming service’s new helmsman.
That chatter never made sense outside of fantasy boardroom leagues — if there ever was such a thing — and for now, the point is moot. Pandora Media Inc (NYSE:P) tapped a former Microsoft Corporation (NASDAQ:MSFT) executive to lead the company into the new age of profit potential, royalty negotiations, and big-tech competition.
It’s an intriguing hire. McAndrews isn’t the terrestrial radio guru that Karmazin was before winding up at Sirius XM Radio Inc (NASDAQ:SIRI). His specialty has been digital marketing. Then again, this is exactly what Pandora Media Inc (NYSE:P) needs. The 71.2 million active listeners who streamed 1.35 billion hours of content last month aren’t there for the programming. Pandora Media Inc (NYSE:P)’s a technology-driven company that serves up millions of tunes based on a proven platform that serves up personalized playlists. It doesn’t need Karmazin to woo Howard Stern or Martha Stewart over. It just needs to monetize its costly bandwidth and licensing fees through advertising. In that sense, McAndrews is perfect for the job.
However, just as he built up aQuantive, only to hand it over to Microsoft Corporation (NASDAQ:MSFT) for billions, could this be a prelude to a Microsoft buyout?
It’s a coincidence, sure, but wouldn’t Pandora Media Inc (NYSE:P) look perfect on Microsoft’s arm? Microsoft Corporation (NASDAQ:MSFT) rolled out Xbox Music a year ago, and it beefed up the platform over the weekend by announcing access on iOS and Android devices. However, Microsoft would go from being a fledgling player in what is about to become a very crowded niche, to the king of the hill with Pandora in its arsenal.
We also can’t dismiss Sirius XM Radio Inc (NASDAQ:SIRI) as a potential buyer.
It’s far less likely, though. Sirius XM Radio Inc (NASDAQ:SIRI) is investing its cash flow in buybacks, and it already announced a beefy acquisition this summer to have some more skin in telematics. However, Sirius XM Radio Inc (NASDAQ:SIRI) would be the king of all growing audio media if it operated the satellite radio monopoly and the top dog in streaming.
For now, it’s highly unlikely that Pandora Media Inc (NYSE:P) and its investors would even pursue an exit strategy. The stock’s trading within loose change of another two-year high, and any purchase would have to take place at a stiff premium to the stock’s already lofty valuation. Then again, we know that Microsoft Corporation (NASDAQ:MSFT) has a habit of overpaying for acquisitions. It did exactly that the first time it shook hands with McAndrews.
Is the market ready for a sequel?
The article Will Microsoft or Sirius XM Buy Pandora? originally appeared on Fool.com and is written by Rick Munarriz.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Pandora Media. The Motley Fool owns shares of Microsoft.
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