The newspaper said that the talks have not advanced far and that executives have not yet discussed price, but have been weighing any potential antitrust concerns that would arise from a deal.
The newspaper said a deal could be at least a year away.
Sirius CEO Mel Karmazin dismissed the report Wednesday morning during a conference call with financial analysts to discuss the company's fourth-quarter earnings. "I have not met with the chairman; I have not met with the CEO" of XM, Karmazin said. "I have no idea where any of this came from."
Officials at XM Satellite were not immediately available to comment.
Sirius executives have in the past said that they believe the Federal Communciations Commission would take issue with such a deal. The two companies now operate under separate FCC licenses.
Separately Wednesday, Sirius posted a wider quarterly loss and forecast 2005 sales below analysts' average targets, sending its shares down 3.9 percent.
Sirius forecast full-year 2005 sales of $210 million, compared with the $214.56 million expected by analysts, on average, according to Reuters Estimates.
For the fourth quarter, the satellite radio company posted a net loss of $261.9 million, or 21 cents per share, compared with a loss of $147.8 million, or 14 cents a share, a year earlier.
Sales for the fourth quarter rose 419 percent to $66.9 million.
Sirius said it had 1.14 million subscribers as of Dec. 31, and said subscribers had risen to more than 1.24 million subscribers as of Jan. 24. It said it now expects to have 2.5 million subscribers by the end of this year.
Shares of Sirius fell to $5.85 in premarket trading on the INET electronic brokerage, down from a close of $6.24 Tuesday on Nasdaq.
's="" david="" becker="" contributed="" to="" this="" report.<="" i="">
Story Copyright © 2005 Reuters Limited. All rights reserved.