XM Curdles as Churn Comes to Light

Investors are suddenly picking up some troubling signals from XM Satellite Radio (XMSR Quote).

The Washington, D.C., pay radio broadcaster and 2003 market favorite posted seemingly solid first-quarter financial figures Thursday, including a threefold year-over-year sales increase. But Wall Street's enthusiasm was tempered by disclosure of a stealthy and unhealthy subscriber-departure trend.

There's little question that many drivers, particularly new car buyers, are willing to pay $10 a month for 120 channels of radio programming. XM, after all, expects to have nearly 3 million customers by year-end. The nagging issues for investors are how much cash it will take to keep subscribers coming in the door and, more pointedly, how many will stay after XM paid so much to attract them. ...