XM Satellite Losses Exceed Estimates

In a brilliant PR move, XM Satellite Radio managed to report its earnings in the sixth paragraph of its actual earnings release. The company begins the announcement with "XMSR today announced earnings for the three-month period ended March 31, 2008." It then trumpets its 17% increase in first quarter revenues, 18% subscriber growth, new customers, blah blah blah. Then, after a discussion of its first quarter "adjusted operating loss", which is one of those alternative earnings measures typically invented by companies who are attempting to masquerade larger losses, the company mentions its $129 million loss. Despite XMSR's "ample" liquidity and "strong" financials, it is difficult to support a business plan that involves charging a subscription for something that is essentially offered for free (albeit with annoying commercials.) Furthermore, given that the cost of launching a satellite can cost in the neighborhood of $50 million, the company has managed to pinpoint the most expensive avenue possible to offer a service.
The satellite story can and has ended badly in the past. Does anyone else remember the expensive bombs that were Iridium and Globalstar? These companies trumpeted the miracle of satellite phone service, offering customers the ability to receive service anywhere in the world. I actually had the pleasure of seeing an Iridium phone in 1998. It was the most preposterous electronic gadget I'd ever seen in my life. It was so large and unwieldy that it required a suitcase to hold all the components. Furthermore, when it was removed from its 50 pound case, a two-foot antennae had to be unfolded in order to receive reception. The handsets cost several thousand dollars and the service providers planned to charge $9 a minute. Most potential consumers examined their puny non-satellite phones, decided they didn't need to be reached while climbing Mount Everest, and resisted purchasing the phones. Although XMSR has managed to attract some customers, it has blown through over $4 billion of its investors cash. How much longer investors will be able to tolerate losses going forward remains to be seen. I, for one, will be tuning in on my free local radio station to hear the answer.