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XM Satellite Fan Flees Cash Furnace

Jack Roberts warns there's a crisis ahead for shareholders.

XM (XMSR) director Pierce "Jack" Roberts jumped ship after failing to convince executives that costs were in danger of running out of control.

Roberts, a former telecom banker with

Bear Stearns

(BSC)

who more recently has worked in private equity investments, emailed a resignation letter to XM Chairman Gary Parsons and the rest of the board Monday, the company disclosed Thursday.

In the email, Roberts says he is "troubled about the current direction of the company" and that he made his opinions "known in an increasingly vociferous manner."

XM included the letter in a filing Thursday as the

company reported steep losses and alarmingly high costs related to subscriber additions.

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In the filing, the company sums up the disagreement as a dispute over growth vs. cash flow. Roberts' letter is bound to intensify the debate over the sustainability of a business that has a perpetual need for new financing to support huge upfront and continuing expenses. But the tradeoff of deep losses for fast growth so far has been one investors have been willing to make, as rival

Sirius

(SIRI) - Get Sirius XM Holdings, Inc. Report

and XM sign up millions of new users a year.

"Given current course and speed there is, in my view, a significant chance of crisis on the horizon," Roberts wrote.

Roberts has served on XM's board for five years and was at Bear Stearns when the bank was arranging financing for XM, Sirius and Globalstar, a failed satellite phone venture, according to people who are familiar with Roberts. With Roberts as its lead telecom banker, Bear Stearns was one of the biggest firms behind the rise of the competitive local exchange carrier, or CLEC, sector.

Outfits like Intermedia Communications attracted big money from investors on the high-stakes bet that the upstart phone companies could outflank the big Bells. However, most of those ventures failed or were acquired.

XM shares fell $1.85, or 7%, to $23.40, and Sirius was down 12 cents, or 2%, to $5.70 in early trading Thursday.