In a SEC filing yesterday, XM has officially confirmed that certain satellite radio receivers shipments have been suspended as part of an investigations to maintain FCC compliance.

In the filing, XM stated:

 As previously disclosed, on April 25, 2006, we received a letter from the Federal Communications Commission stating that its Office of Engineering and Technology Laboratory had tested the Delphi XM SKYFi2 radio and determined that its FM modulator wireless transmitter is not in compliance with permissible emission limits. We are also aware that Audiovox, manufacturer of the Audiovox Xpress, a radio designed to work with the XM system, received a similar letter from the FCC, and has suspended shipments of that product at the present time. We have been conducting a review of the SKYFi2, Xpress and other devices compatible with the XM system that use a wireless FM modulator to transmit XM programming from an XM radio to an FM radio. We have provided information to the FCC regarding the SKYFi2 radio in accordance with the FCC letter.

Further, we are implementing a series of actions involving various radios to bring them into compliance, including requesting our manufacturers to suspend shipments to retail of radios or accessories that may require changes to operating or installation instructions, or modifications to software or hardware, such as small attachments that reduce emissions through the antenna or cigarette lighter adapter. We will seek new equipment authorizations where appropriate, and expect to provide additional information to the FCC shortly, including test results for several XM radios, as modified, showing compliance with the in-vehicle testing criteria.

In this connection, the FCC recently (April and May) released clarifications of its procedure for in-vehicle testing in a selection of representative vehicles and our test data are being prepared based upon these procedures. We are working to limit the interruption in supply of certain models of XM radios to retailers, and we plan to have modified devices shipping to retailers in the near term. No health or safety issues are involved with these wireless XM radios, and this matter does not pertain to any XM radios which are factory installed in new vehicles. We can provide no assurances at this time that our actions will be deemed sufficient by the FCC, or that other remedies that may be required by the FCC will not have a material impact on our consolidated results of operations or financial position.

According to Radio Ink, XM spokesman Chance Patterson told the AP that other receivers that may face shipment suspensions include the Roady XT and the XM Sportscaster. 

[SEC Filing] 

XM posted the presentation for the Annual Shareholders Meeting today. Some interesting points that we haven't seen in previous presentations. I grabbed a few snippets of interest that you can view after the jump...

 

XM Satellite Radio has reported a change to its subscriber and financial guidance for 2006, projecting that it will end 2006 with 8.5 million subscribers (down from earlier guidance of 9 million), resulting in subscriber revenues of $835 million and an EBITDA loss of $235 million.

XM reaffirmed that it remains on track to have positive cash flow from operations for the fourth quarter of 2006 and on an annual basis for 2007.

Hugh Panero cited "overall softness in retail during the second quarter" as one of the key reasons of this. Perhaps the line of most concern from the press release is this one:

XM is currently working through regulatory and legal challenges, the resolution of which could affect future product availability and operating results, and require us to review this revised guidance. 

Let's hope this is only referring to the Audiovox Xpress. 

This is going to make Gary Parson's session today at the Morgan Stanley Media Conference a little hot under the collar. Unfortunately, neither stock needs any more bad news at this point.

[Press Release] 

SIRIUS Satellite Radio's CFO and Executive Vice President, David Frear, will be speaking at the Morgan Stanley Media & Communications Conference today at 2:00pm ET. You can listen to the webcast here.

Then at 2:45pm ET, XM Satellite Radio's Chairman of the Board, Gary Parsons, will be speaking also at the MSMC. You can listen to that webcast here.

XM Satellite Radio was at the CIBC World Markets Media Conference and held a webcast this morning. There wasn't really anything unexpected brought up, but the webcast and presentation (PDF) are up online.

Looks like everyone's jumping on board this class action lawsuit against XM Satellite Radio. Here's a list of the firms now involved, courtesy of SSG:

1. Brodsky & Smith L.L.C. - info here
2. Cohen Milstein, Hausfeld & Toll P.L.L.C - info here
3. Law Offices of Charles J. Piven - info here
4. Schatz & Nobel - info here
   
5. Law Offices Bernard M. Gross, P.C. - HERE
   

That didn't take long. Another lawyer jumps on board the Class Action suit against XM bandwagon.

A class action lawsuit has been filed against XM Satellite Radio Holdings Inc, on behalf of purchasers of the common stock of XMSR between July 28, 2005 and February 15, 2006.

The charges are that XM Satellite Radio Holdings, Inc and Hugh Panero made "materially false and misleading statements to the market during the Class Period" which are violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5.

In short, the claim is that XM Satellite Radio's ability to reach its goal of 6 million subscribers by EOY 2005 was misrepresented, and that they failed to disclose that XM's SAC would rise as it did in Q405.

There are many more details to this class action suit that you can read about in the press release. This just cannot be good for the XMSR share price, which has been getting hammered as of late from a string of bad news.

Thanks to everyone who sent this in! 

XM Satellite Radio disclosed in a regulatory filing last Thursday that the Federal Communications Commission found that one of its products, the Delphi XM SKYFi2, wasn't in compliance with applicable transmitter emission limits. XM says it is conducting an internal review, will respond to the letter shortly and is cooperating fully.

XM also said the Federal Trade Commission was investigating whether its marketing practices were in line with rules governing telemarketing, including the Telemarketing Sales Rule and the Truth in Lending Act. The company said in the filing that it received both inquiries on April 25th and was cooperating fully with them.

It's a little early to actually say what the reprocussions of these inquiries entail, but the FCC investigation seems a little late considering how long the unit has been on the market. On a conference call with analysts, XM Satellite Radio's chairman Gary Parsons said the FCC notice on the radio unit was unlikely to result in a product recall, and noted that it was not a health or safety issue.

Also speaking on the call, Hugh Panero, the CEO of XM Satellite Radio, expressed frustration that the notices came so soon before the company's earnings announcement. "I would like to avoid having these kinds of letters show up two days before our earnings call, but that's the journey we're on right now," Panero said. He said he believed the company was already complying with marketing rules.

For the first quarter 2006, XM Satellite Radio reported revenue of $208 million, an increase of over 100% from the $103 million reported in first quarter 2005. XM's subscriber acquisition cost (SAC) fell sharply from the fourth quarter to $62, higher than the $52 it posted one year ago, but down from $89 in the fourth quarter of 2005.

Cost per gross addition (CPGA) was $94 compared with $90 in the year ago period, but was off from $141 in the fourth quarter of last year.

In all, XM's total cost of revenue rose 74 percent in the quarter.