Trading in XM Satellite Radio shares were recovering slightly this morning (Feb. 16) from the news of the resignation of one of its board members, Pierce J. Roberts, Jr., who wrote in a letter to the
Trading in XM Satellite Radio shares were recovering slightly this morning (Feb. 16) from the news of the resignation of one of its board members, Pierce J. Roberts, Jr. At mid-morning, shares were down $1.41 to $23.84.
Additionally, Roberts sent letter to the board, raising concerns: "Given current course and speed there is, in my view, a significant chance of a crisis on the horizon. Even absent a crisis, I believe that XM will inevitably serve its shareholders poorly without major changes now.”
XM Radio board chairman Gary Parsons told analysts this morning that the exit of Roberts was over the issue of XM’s spending levels. As Parsons described it, Roberts said to him and to the rest of the board that XM was “spending too heavily and slowing down that spending would [generate] a faster cash-flow pop.” Parsons said “We clearly understand that the company can turn [cash flow] positive as soon as we pull back on the spending” and that “this is a balancing act that we take very seriously.”
Parsons went on to say that based on numbers from Q4 “we did grow strongly but not as much as planned,” making a distinction between strong growth and economic growth. “We feel that we will continue to grow strongly and economically and we will return to that [balance] later in the year,” he said.
The news of Roberts' exit came in advance of XM’s earnings conference call this morning to discuss 2005 results. The satcaster finished 2005 with 5.9 million subscribers, $503 million in revenues and a cash-flow loss of $434 million.
During that call, XM execs said they expect to grow subscriber rolls by 50% this year and to finish 2006 with 9 million paying listeners. The firm also projects finishing the year with $860 million in subscriber revenues and to have a cash flow loss of $250 million. XM CEO Hugh Panero said he expects his company to become cash flow positive by the fourth quarter of 2006 and to make 2007 its first full year with positive cash flow.