XM's downer upper

Satellite radio launches, with a astral asterisk
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XM Satellite Radio finally got off the ground last Tuesday, only to have its stock come crashing to earth two days later.

The company said last Thursday that the power arrays of its two satellites, "Rock" and "Roll," manufactured by Boeing Satellite Systems Intl., are degrading faster than expected. That may require XM to replace the satellites mid-to-late decade rather than the 12-to-15 years they are supposed to last. (XM's competitor, Sirius Satellite Radio, which debuts later, has satellites built by Loral Space & Communications, so it isn't affected.)

"XM anticipates the solar-array situation will have no material impact on its quality of service, conduct of business or cost of operation," the company said in a statement last week. XM also has notified its insurance carriers that it might be making a claim in coming years.

The news put a damper on XM's launch events last week, which already had been delayed once in light of the Sept. 11 terrorist attacks on New York and Washington. XM's stock has been in a steady decline all year, hitting a high of $44 last October. After the news about the satellites broke last Thursday, XM's stock closed at $4.30, its lowest level ever. At press time Friday, the stock was climbing back to previous levels, which had been hovering around $10 in the past month.

XM launched with a more subdued Washington event than the galas it had planned. The company instead gave $10,000 to the New York Firefighters' 9-11 Disaster Relief Fund and $10,000 to the American Red Cross effort at the Pentagon, said XM President and CEO Hugh Panero.

XM now is beaming 100 channels of music, news, talk and sports to 400 subscribers in Dallas and San Diego, and plans to make service available to the entire South by the end of October. That's an acceleration of XM's previous plans, which were to add only the Southwest next month. XM will have the rest of the country online by the end of November, Panero says.

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