XM Satellite Radio in a recent SEC filing reported that they have lost their arbitration claim to recover the remaining 20% of the value of the two Boeing 702 class satellites put in orbit (XM-1 and XM-2).
In July 2004, XM reached agreement with insurers that covered 80% of the amount insured. The problem lies with a progressive solar array power degradation issue that is common to the first six Boeing 702 class satellites put in orbit. XM-1 and XM-2 just happen to be the fifth and sixth Boeing 702s launched. XM walked away with about$142 million from the insurers thanks to this.
In August 2004, XM filed for arbitration to get the remaining 20% of the insured amount. It's this claim was rejected, and no further proceeds will be given.
Oh well. You win some, you lose some.
Ah, Robin, the aribtrators called me and asked me what to do. I said screw XM.
Satellites are expensive, to say the least. I don't think $142 million even pays for one satellite... Does XM have the means to replace their satellites? Do they have to be replaced ASAP, or am I over reacting?
Hank, the 'replacement' satellites are already built. XM-3 was launched probably 6 months ago and it in orbit by itself at 85w. The original two are now colocated at 115w. XM-4 will launch in october of this year, and will be located at 115w. my understanding is that one of the originals will be moved back to 85w, and both will be either shut off or working on low poer as backups.
Hank... XM-1 and XM-2 were the first two birds launched by XM (named Rock and Roll respectively). XM-3 (Rhythm) was launched in the last couple of years, and XM-4 (Blues) is about to be launched.
The Boeing 702s have a 15 year life-span. XM is only 1 of several companies that have filed for insurance claims against defective 702s.
Back in 2000, the Boeing stated that it had 34 birds in their backlog at a value of $6 billion. The average cost in 2000 for those 34 sats (not all 702s mind you) is $176 million and change.
80% of $176 million is about $142 million which was the settlement.
I wouldn't read into this too much. Their stock price took a little dip, but not as much as if all of their birds failed simultaneously or something catastrophic.
Hank, don't fret, the satellites aren't going to die anytime soon. They will lose about 30% of their power and/or life due to the defect. So instead of 15 years at full power, they'll get 11.