XM Loses Board Member Over Potential ‘Crisis’

XM Satellite Radio has lost a board member over concerns about the company’s spending levels.
The satcaster revealed Thursday that board member Pierce Roberts resigned earlier this week because of what he called a “significant chance of a crisis,” in a letter to XM Board Chairman Gary Parsons.
Parsons responded to questions about the resignation during the company’s earnings teleconference call, saying there was a disagreement among Roberts, other board members and the company about the balance of growth vs. cash flow.
Roberts was concerned “XM was spending too heavily to achieve rapid growth” and was worried about the satcaster’s “more immediate positive cash flow,” Parsons said.
“Other board members differ,” he said, supporting stronger programming, content and marketing efforts. “This is a balancing act for management and the board.” The differing opinions, he said, are similar to what the company hears from investors at large.
XM understands it will see a positive cash flow “as soon as we pull back on the accelerator,” but also believes that adding assets and value comes with every subscriber, if done on “economically rational” terms.
In a statement sent with a filing to the SEC, XM said: “The company and other directors concur in Mr. Roberts’ assessment that lower programming and marketing expenditures, and a potentially lower growth rate, would likely result in earlier positive cash generation. The other directors, however, believe that the company’s high growth rate, market leadership and large base of subscribers are strategically important assets to ensure the company’s long-term value and can be sustained while also reaching positive operating cash flow later this year. “
These differing views of strategic direction and balance between growth and profitability have been voiced openly for a number of years, but Roberts states that he can no longer be effective given ongoing disagreement with management and other board members. He was one of 11 board members and served on several XM board committees.
According to Roberts’ bio on XM’s Web site, he chairs the board of Telephia Inc., which provides measurement data to mobile operators, device manufacturers, and content companies. He is also a principal at Mill Road Capital. Roberts was with Bear Stearns from 1993 to 1998 as head of the telecom investment banking group.