XM Chops Jobs, Sirius Denies Bankruptcy

Promising technology, interesting programming, and good business plans may not be enough to keep satellite radio services XM Radio and Sirius Radio aloft. Both companies are struggling with massive financial problems as they scramble to gain subscribers.

On Wednesday, November 13, XM Satellite Radio laid off 80 of its approximately 480 employees and initiated a move to more affordable programming in an attempt to contain costs. Analysts have predicted that the year-old startup, which lost $117 million in the second quarter of this year, is in danger of running out of money in early 2003 unless it makes some spending cuts. "They are burning $90 million a quarter," Lehman Brothers analyst William Kidd told the Wall Street Journal.

Two days later, on November 15, XM's rival Sirius Satellite Radio denied a Reuters report of a possible bankruptcy. Almost a month earlier, on October 17, Sirius had announced a stock deal that promised to erase its debt. The company has reaffirmed plans to proceed with the voluntary debt-for-equity exchange announced last month, under which current stockholders would pump in an infusion of new capital. A bankruptcy petition may be prepared as a "fall-back" should the recapitalization effort fail.

Satellite radio offers tremendous promise, but infant mortality could claim its first pioneers. Both XM and Sirius have thousands of electronics dealers and automotive aftermarket installers selling their receivers. Many automakers have committed to offering satellite receivers as options in new models.

XM has approximately 201,500 subscribers, with 350,000 predicted by the year's end. Sirius was later getting its operation launched, and hopes to have 40,000 subscribers by December 31. The monthly fees charged by the two services range from $9.95 to $12.95.