NEW YORK – XM Satellite Radio Holdings Inc. (XMSR) said on Tuesday that it is suspending the sale of two products and reviewing others after a U.S. regulator said the devices exceeded limits for wireless signal strength.
XM said the suspensions applied to Audiovox Corp. (VOXX) and Delphi Corp. (DPHIQ) radios that let consumers play XM's satellite radio service on regular radios but declined to say if it stopped the sale of other products.
The satellite radio service said it was keeping its latest subscriber growth target for 2006 but said in a filing at the U.S. Securities and Exchange Commission that it could provide no assurances that the issue would "not have a material impact" on its operating results or financial position.
"We're working to expedite this issue and minimize the extent of any interruption at retail. We're continuing to target 8.5 million year-end subscribers," spokesman Chance Patterson said.
XM, which cut its forecast from 9 million on Friday, said that the Federal Communications Commission ruled that the signal strength of wireless transmissions from the Delphi and Audiovox products exceeded FCC limits, potentially interfering with nearby FM radios using similar frequencies.
XM leads the U.S. satellite radio service with more than 6.5 million subscribers, compared with 4.1 million at its rival Sirius Satellite Radio Inc. (SIRI). The sector is one of the world's fasting growing new technologies, and analysts have forecast total users may top 40 million in a few years.
But XM has been battered this year with bad news, including probes by the U.S. Federal Communications Commission and U.S. Federal Trade Commission, concerns about its relationship with beleaguered auto maker General Motors Corp (GM), and charges that it is spending too much in its quest to gain new users.
The company said in its filing that the FCC sent it a letter stating that Delphi's XM SKYFi2 radios, which it started selling more than a year ago, was not in compliance with emission limits.
Audiovox also received a similar letter about its Audiovox Express radio, which started selling in late 2005, XM said.
XM said it was also taking a series of actions involving various radios it did not name to bring them into compliance with guidelines.
Its actions include requests to manufacturers to stop shipping radios or accessories that might need hardware or software changes or changes to operating or installation instructions, XM said.
For example changes could include the addition of small attachments that reduce emissions, it said. Patterson declined to say if XM was stopping the sale of other products besides the ones named in the filing.
He said that factory installed satellite radios for cars were not affected and that it did not suspend sales of its digital music players from Samsung Electronics Co. Ltd. and Pioneer Corp.
XM said in the filing that it would look for new equipment authorizations where appropriate and that it expects to give the FCC new information shortly, including the results of modified radios that comply with in-car test criteria.
The company said that the sale suspensions do not involve any health and safety issues. Patterson said that no product recalls were planned.