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Company officials say the "growth versus cash flow" debate is the core problem.
Stephen Taub, CFO.com | US
February 16, 2006
XM Satellite Radio Holdings Inc. director Pierce Roberts has resigned from the company's board, citing "a significant chance of a crisis on the horizon," according to a regulatory filing.
In a letter fired off to chairman Gary M. Parsons, Roberts did not elaborate on the nature of the crisis, but added that, "Even absent a crisis, I believe that XM will inevitably serve its shareholders poorly without major changes now. It is clear to me that I cannot be part of the solution and I will not be part of the problem."
On Thursday, the company reported a larger loss for the fourth quarter of 2005 compared with its results for the same period a year earlier. The company's stock tumbled more than 8 percent when trading got under way.
In the letter, Roberts said he was troubled about the current direction of the company. "For some time I have made my analyses and observations known in an increasingly vociferous manner to the Board and a number of senior managers of the Company," he wrote. "I am not having any useful effect and I care too much and believe in my own views too much to just 'go along.'"
In response, company officials issued a regulatory filing saying they believe the disagreement with Roberts primarily involves "the strategic balance of growth versus cash flow."
In the filing, the company noted that Roberts has historically favored more stringent cost control, specifically involving lower marketing, programming, and promotional expenditures. "While Director Roberts believed that expenses could be lowered without jeopardizing subscriber and revenue growth and/or market share, he was prepared to risk growth or market share impacts if they resulted, with the belief that positive cash generation would occur sooner, and the company's stock would be valued more highly as a smaller, but more profitable enterprise," XM stated.
The company added that these opposing views related to strategic direction and the balance between growth and profitability have been voiced openly for a number of years.
Roberts has served on the board of XM for more than five years, and has been a member of all major committees, including the nominating, compensation, audit, and informal finance committees. He is currently chairman of the board of Telephia Inc. and a principal at Mill Road Capital.
Between 1993 and 1998, Roberts was the head of Bear Stearns's telecommunications investment banking group. Prior to that, he was managing director at The Blackstone Group, vice president of corporate development at BellSouth Corp., and founder of his own corporate-development business.