- The Washington Times - Monday, October 22, 2001

Shares of XM Satellite Radio Holdings Inc. began recovering from a year-low after the company said last week it was getting $66 million in funding from two Boeing Co. units to continue its satellite-radio service.

The stock of the Washington company closed at $8.35 Friday on Nasdaq, up from the $5 to $6 range where it had traded for about a month.

"The market has been pretty erratic over the past month or so," says Riyad Said, an analyst with Friedman, Billings, Ramsey. "If you look back to the end of August, post Sept. 11, [the stock] actually has gone back to where it was around then, at $8.50 to $9."

Aside from the weak market, shares of XM were hit in late September on worries that the company's satellites may have a shorter life span than originally expected.

XM began broadcasting its radio service Sept. 25 in San Diego, Dallas and Fort Worth, Texas, nearly two weeks later than scheduled, because of the terrorist attacks. This rollout places XM's service and radios in several southern states and large urban areas like Houston, Miami, New Orleans and Atlanta.

"We wound up making our launch event less festive and had to do some major rescheduling," says XM spokesman Charles Robbins. "But the launch is taking place, and we'll complete the national rollout as planned within 30 days."

XM, founded in 1992, offers 100 channels of music, news and talk shows with little advertising. Like cable TV, the service will be available only by subscription, for $9.99 a month.

The company's sole rival, Sirius Satellite Radio Inc., delayed the start of a similar service till next year after Chief Executive Officer David Margolese quit last week.

The companies are targeting car makers as subscribers.

XM has agreements with General Motors Corp., Honda, Cadillac, Isuzu and Suzuki. GM, an investor in XM, is putting satellite radios in Cadillac Sevilles and DeVilles this year. A year from now the car maker is expected to have the satellite radios in 20 of its models.

XM's satellite radios will also be available in stores, at a cost ranging from $280 to more than $1,000, analysts say.

Research groups, like Yankee Group, estimate that satellite radio has already picked up about 800,000 customers. They expect the market to grow to about 21.6 million subscribers by 2005.

But some analysts question whether customers will sign on quickly enough so that the company can pay its debts.

"Debt-holders are extremely important in a company like this, because if the company can't pay the interest on the debt that it has … it means things are not good for the stockholders," says Chris Bischof, an analyst with Miller Tabak Roberts. "And the bonds are well below full value, because there's doubts about the ultimate success of the company's venture."

Last week's cash infusion for XM came in the form of $35 million in debt financing and the deferment of payments on $31 million that XM owes Boeing.

Together with $125 million in existing cash, that money will allow XM to continue operations into the second quarter, says Mr. Said, who expects the company to do more fund raising in the next few months.

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