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TiVo Takes On Tomorrow

By Alyce Lomax (TMF Lomax)
January 12, 2005

It seems it's been a little difficult for investors to keep upbeat regarding TiVo (Nasdaq: TIVO) here lately. After some news many found disconcerting last week, we learned today that Chairman and CEO Michael Ramsay is stepping down, searching for a new candidate for the chief executive spot. Somebody, hit rewind!

Despite this Motley Fool Stock Advisor pick's efforts, such as having released the long-awaited TiVoToGo, last week's word on DirecTV's (NYSE: DTV) own digital video recorder, or DVR, made by another unit of News Corp. (NYSE: NWS), hit investors where it hurt (considering how its partnership with DirecTV had been one of TiVo's biggest benefits).

As one member of our TiVo discussion board opined, it's not like investors didn't see that coming. DirecTV's having dumped its TiVo shares and vacated its spot on TiVo's board was already known, as were its plans to offer its own DVR offering to its subscribers. Of course, TiVo struck back by talking definitively about coming plans, such as products that bypass digital cable set-top boxes as well as Internet-based delivery of programs.

Ramsay has been serving as CEO and chairman ever since the company first formed in 1997, so one can definitely argue that he has served as a visionary. TiVo's press announcement -- titled CEO Succession Plan -- says Ramsay is seeking a new CEO so that he, as simply chairman, can spend more time on the strategic aspect of dreaming up ways to get more subscribers on board. The company denied immediate rumors that maybe this was a move leading up to a sale.

Ramsay's reasoning may sound like balderdash to skeptics. Some TiVo investors are currently getting a case of the chills, anyway, given the tough times the company faces. But it's not as though this type of move is uncommon or unprecedented.

For example, back in 2000, Starbucks (Nasdaq: SBUX) founder and head visionary Howard Schultz pulled a similar move and put Orin Smith in place as president and CEO while he stayed on as chairman, a move that turned out to be a perfectly good tactic when you consider Starbucks' shining success in the years since then. And, of course, at that time, investors looked at the move with skepticism.

Although the challenges for TiVo aren't lost on me, today's word gives me hope that a new CEO will add even more brain power to the group that's steering TiVo into the crucial next stages of innovation. Although there are plenty of other reasons investors might worry about TiVo's future, there's little reason to think today's news is one of them.

TiVo is a Motley Fool Stock Advisor pick. To see what other stocks have been singled out by David and Tom Gardner, try it for six months, risk-free, by clicking here. Or, talk about the future of TiVo -- and recent news -- on our own TiVo discussion board -- just one of many lively forums in the Fool community.

Alyce Lomax does not own shares of any of the companies mentioned.