Dueling Fools: TiVo Bull

My wife and I hate live TV. We're impatient, and I'll bet you're no different. TiVo (Nasdaq: TIVO  ) spoiled you, didn't it? You're not alone, Fool; there are more than four million of you. But that's only one reason to like this speculative stock.

Better pitches on the way
My wife zaps commercials like those weird blue lightning lamps zap flies. As she explains it, "I've no time for commercials. I'm too busy." That's exactly right. I've seen her flip back and forth between her O, The Oprah Magazine, and The Colbert Report as we lie in bed. (Bears? You're on notice.)

But TV commercials aren't going the way of the dodo. They account for far too big a business on Madison Avenue: $148 billion in 2005 alone, according to researcher ZenithOptimedia. Right now, those dollars are being largely wasted.

The Google model pays
That won't last. Instead, the power brokers will come up with a better way to pitch their goods to you. Google (Nasdaq: GOOG  ) provides that approach for the Web, and it's become a multibillion-dollar business as a result. TiVo can do the same for TV. In fact, its advertising platform is expected to be a part of new boxes that will be made available through Comcast (Nasdaq: CMCSA  ) when it replacesDirecTV (NYSE: DTV  ) as TiVo's primary distribution partner -- outside retail, of course.

Even more interestingly, advertisers are more likely than ever to blend TV and the Web for their pitches. Show of hands: How many of you visited after seeing its Super Bowl commercial? Thank you. The spectacular inefficiency of stand-alone TV advertising makes the Web a necessary component.

Knock, knock
That means you'll soon have Madison Avenue beating a path to TiVo's door, if it isn't already. Why, you ask? One word: patents. TiVo has them, the knock-offs don't. Sure, NDS (Nasdaq: NNDS  ) makes a decent box. Can it blend the Web and TV? Not without TiVo's permission. TiVo bought the rights to a patent for mixing TV signals and Internet access from IBM last summer. That's not all: TiVo has more than 70 patents granted, and at least 100 still pending.

All of which means that, if advertisers want to deliver more targeted ads over the tube, and blend those ads with Web content, TiVo holds the keys to the kingdom.

Bah humbug to box-makers
Sure, there's competition, but in the long term, it isn't from the other box makers. The real fight is to combine the Web and TV in a single, well-built player capable of delivering highly targeted, relevant ads. That's TiVo. Right now.

It could also be Apple (Nasdaq: AAPL  ) , Cisco (Nasdaq: CSCO  ) , or Motley Fool Inside Value pick Microsoft -- but that's still in the future.

Creating an interactive TV-recording box isn't easy. Otherwise, Apple would have rolled one out during last month's Macworld, as many had speculated. (It didn't.)

Interfaces aren't easy to create, either. But here, too, TiVo has an advantage. It's called HME, a Java programming environment for bringing software to the TiVo device. You know, the kind of software that might allow the Web and TV to coexist on one screen? HME debuted with the broadband-connected TiVo Series 2, and it's since proven popular among users.

Couldn't Apple, Cisco, Microsoft, or even Google do the same? Of course they could. But development, testing, licensing agreements, and the like all take time. Cash is cheaper, and they all have billions of it. In fact, any of them could spend $1 billion for TiVo right now -- a double from here -- and not break a sweat. With $148 billion (and counting) at stake, such an outcome seems very likely to me.

The Foolish bottom line
That's why I'm not surprised David Gardner has kept TiVo in his portfolio for Motley Fool Stock Advisor. The thesis is still intact, and it's worth noting that David has been right much more than he's been wrong. His picks are clobbering the market by more than 25% as of this writing. (If that sounds good, you can be our guest at Stock Advisor for 30 days.)

True, TiVo's popularity hasn't translated into profits. And, yes, the stock is still speculative by any measure. But TiVo today is like, well, a good TV show that has yet to make the network lineup. That makes now a very good time to tune in.

Wait! You're not done. Go back and read the other arguments, then vote on the winner of this week's Duel.

Fool contributorTim Beyerspines for a real TiVo daily. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 501967, ~/Articles/ArticleHandler.aspx, 10/28/2016 2:35:14 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 5 hours ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 4:00 PM
AAPL $114.48 Down -1.11 -0.96%
Apple CAPS Rating: ****
CMCSA $61.48 Down -1.08 -1.73%
Comcast CAPS Rating: ***
CSCO $30.38 Down -0.17 -0.56%
Cisco Systems CAPS Rating: ****
DTV.DL $0.00 Down +0.00 +0.00%
DirecTV CAPS Rating: ***
GOOGL $817.35 Down -4.75 -0.58%
Alphabet (A shares… CAPS Rating: *****
NNDS $62.93 Down +0.00 +0.00%
NDS Group CAPS Rating: ****
TIVO $20.05 Down -0.15 -0.74%
TiVo CAPS Rating: **