XM Satellite: From Handshake To Stores In Just Nine Months

The lesson: Partnerships are essential in the world of digital convergence, where services are increasingly packaged with hardware

It's hard to imagine a rivalry more intense than that of XM Satellite Radio Holdings (XMSR ) and Sirius Satellite Radio Inc. (SIRI ), the two satellite radio upstarts. Sirius, of course, paid shock jock Howard Stern $500 million to sign on. Both companies offer hardware discounts and free trials. And both, via hookups with electronics outfits, are racing to be first out with the latest gizmos.

In the white-hot world of digital convergence, where services are increasingly packaged with hardware, partnerships are essential to being first to market with the best blend of services and products. "From now on this will be the normal way of doing business in consumer electronics," predicts Dan Murphy, senior vice-president for sales and marketing at XM.

He should know. XM's alliance with Samsung Electronics Co. to produce the first portable satellite radio combined with a digital music player shows how this sort of thing can be done. In April, XM and Samsung plan to release their co-branded Helix, going from handshake to store shelves in just nine months. That compares with the 12 to 18 months it typically takes to bring new consumer electronics to market. Analysts praise the Helix effort. "You look for markets that are already hot and bring them together," says Michael P. Greeson, chief executive officer at tech consultant Diffusion Group Inc.

How did XM do it? A combination of foresight and a good eye for allies. The journey started in early 2005, when the company spotted the opportunity to meld satellite radio with a music player. Even before it found a hardware partner, XM started designing the building blocks for the machine -- including chips, an antenna, and a tiny circuit board. Last May it approached Samsung and discovered that the Korean electronics giant had fixed on the same idea.

Once they signed a deal, the race was on to bring the new device to market. The two companies created a virtual product-development team jointly headed by one manager from each company. Samsung engineers focused on industrial design and manufacturing, while XM focused on the antenna, the user interface, and delivering one-of-a-kind features. Consumers will be able to "bookmark" a song they're listening to on the radio and later buy it on the Napster Inc. (NAPS ) Web site with just a few clicks of their computer mouse.

This collaboration marks a sea change at Samsung. The company used to be a go-it-alone outfit. No more. Now it's on the lookout for more partners. "We have to find other companies that are leaders in their fields who can move as quickly as we can," says Peter Weedfald, a senior vice-president at Samsung Electronics America Inc.

Will XM and Samsung win this race? It has barely begun. But without alliances to speed products to market, they'd have a hard time competing in this new world.

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