Directed 8k On Sirius Units
July 5, 2006
Directed Electronis, distributor of Sirius hardware, has issued an 8K regarding two Sirius pieces of hardware, the Starmate Replay and the S50 Car dock. The text of the 8K is as follows:
Item 8.01. Other Events. On June 30, 2006, we received a letter from the Federal Communications Commission stating that its Office of Engineering and Technology Laboratory has tested the Sirius ST2 and Sirius S50-C radios and has determined that the transmitters are not in compliance with either the applicable operating frequency range or the applicable emission limits. The letter seeks information from us regarding the certification, manufacturing, importation, and other matters relating to these radios. We intend to fully cooperate with the FCC, are conducting an internal review, and anticipate responding to the letter shortly. We are also working with SIRIUS and our contract manufacturers to make any and all necessary modifications to ensure that we distribute only FCC-compliant products, to obtain new equipment authorizations where appropriate, and to minimize any interruption in supply of these wireless SIRIUS radios to retailers and consumers. No health or safety issues are involved with these radios. As previously disclosed, in August 2004 we began selling, marketing, and distributing products for SIRIUS Satellite Radio, a subscription-based satellite radio company that provides content to compatible receivers, including the SIRIUS-branded receivers we distribute. SIRIUS-branded satellite receivers are designed and developed by SIRIUS and manufactured by our contract manufacturers to specifications provided by SIRIUS. We have a multi-year agreement with SIRIUS pursuant to which we have exclusive distribution rights to our existing U.S. retailer customer base, including Best Buy and Circuit City. The SIRIUS-branded products we distribute include plug-and-play receivers, docking kits, home receivers, down link processors, and accessories such as antennas and boom boxes. Although we believe that it is too early in the process to determine with any degree of certainty the significance, if any, of these matters to our business, results of operations, or financial position, we fully expect to resolve these issues in a timely manner and expect that our 2006 results will continue to be in line with prior guidance.Last month Sirius was aware of these letters via the manufacturers of the units. Sirius, at that time, "re-tooled" the units to come into compliance with the FCC requirements and resumed manufacture. Sirius has already been in the process of re-certifying units as required.Comments from Sirius are that they do have hardware that is shipping, and that they anticipate no product shortages due to this issue. Recertifications are in process, and shipments of effected units will resume as soon as the recertification is issued by the FCC.
Hardware that is currently in the reatail channel is not being pulled, and normal shipments are anticipated to resume in a timely manner.
Directed has stated that they do not anticipate the issue to impact guidance. To this point Sirius has indicated the same at investor conferences.
7/05/2006 10:12:00 AM
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