XM Stops Sales of Select Receivers
XM Satellite Radio disclosed late Tuesday in a filing with the Securities and Exchange Commission that it was suspending the sale of two of its radios, while reviewing others. The move comes as a result of a FCC notice that the units were not in compliance with signal strength laws.
The leading satellite radio provider first disclosed that it was under investigation for signal strength issues in its Delphi SkyFi2 receiver in late April. At the time, the FM transmitter in the device was said to operate outside of transmission limits.
In early May, Audiovox disclosed that the company was conducting a review on one of its receivers for a similar problem. According to the filing, it now appears that XM has decided to halt sales of both devices. However, it appears that no recall is likely at this time.
The issues do not pose a safety risk, and the FCC has provided clarification on the transmission limits to the company, XM said in the filing. While it expected some interruption in radio availability, it was working with manufacturers to limit any issues.
XM recently lowered its year-end subscriber growth target from 9 million to 8.5 million, and said it would stand by that number. However, it could not provide any assurances that the issues would not affect the company either financially or through its operating results.
For investors and fans of XM, it has seemed like a tidal wave of bad news for the company. Although it still leads Sirius by a 3 to 2 margin, the smaller of the two satellite radio providers has been red hot as of late, adding more customers last quarter and scoring about a 60 percent share at retail.
The Federal Trade Commission is also investigating XM over its billing and rebate activities, and investors have questioned its relationship with General Motors as well as its subscriber acquisition costs.
To combat the issues, XM will attempt to gain FCC authorizations for new radios, and rush modified radio results to the regulator to speed the process of rebuilding its retail presence.
Meanwhile, Sirius recently upped its end of year guidance to 6.2 million, and the company appeared optimistic that it would be able to easily exceed that number.