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XM Director Quits
AP
XM Director Warns of Crisis, Shares Fall
Thursday February 16, 9:13 am ET
XM Director Warns of 'Crisis on the Horizon,' Shares Plunge in Premarket Trading
NEW YORK (AP) -- XM Satellite Radio Holdings Inc. shares plunged in premarket trading Thursday after board member Pierce J. Roberts resigned, and warned of "a significant chance of a crisis on the horizon" in a letter to the company's chairman.
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Roberts, a former investment banker with Bear Stearns who is now a principal with private equity firm Mill Road Capital, said he resigned as a result of disagreements with the company's management over its future direction. He did not state exactly where he feels XM Satellite Radio is going wrong.
"I have been troubled about the current direction of the company and do not believe that it is in the best interest of the company's shareholders," Roberts said in a letter to XM Satellite's chairman that was filed with the Securities and Exchange Commission. "For some time I have made my analyses and observations known in an increasingly vociferous manner to the board and a number of senior managers of the company."
Roberts said he believes he can no longer be effective, given the ongoing disagreement with management and the other board members, and believed in his views "too much to just go along." He could not be reached for comment.
A spokesman for XM Satellite Radio did not immediately return telephone calls.
According to an analyst at JPMorgan, the disagreement stemmed from the company's increased spending on subscriber growth.
Separately, the Washington-based company reported its fourth-quarter loss widened by 42 percent on higher subscriber acquisition costs and marketing expenses. The company said it had more than 5.9 million subscribers at the end of 2005, up 84 percent from a year earlier, and said its total had risen to more than 6 million in the first week of January.
XM Satellite Radio has been under increasing pressure to hold its lead over smaller rival Sirius Satellite Radio Inc., which this year began attracting more subscribers with the addition of shock jock Howard Stern to its lineup. Last week, XM announced media titan Oprah Winfrey would launch her own channel on the network.
Shares of XM tumbled $2.25, or 8.9 percent, to $23 in premarket trading on the INET electronic exchange. The stock closed Wednesday at $25.25 on the Nasdaq, where it has traded within a 52-week range of $23.01 to $37.31.
Sirius shares fell 16 cents, or 2.8 percent, to $5.66 in premarket trading after it closed Wednesday at $5.82 on the Nasdaq.
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