TiVo (NASDAQ:TIVO), the original purveyor of digital video recorders (DVRs), is set to release earnings news for Q1 2007 tomorrow. Should we expect great things or a humdrum quarter?

What analysts say:

  • Buy, sell, or waffle? 21 analysts follow TiVo. Six of them rate the company a buy, six say sell, and the other nine are holding the middle ground. It all adds up to a resounding, "We're not really sure!"
  • Revenues. Analysts are looking for 26.4% year-over-year improvement in sales to $50.6 million.
  • Earnings. Losses are expected to be wider this year at $0.19 per share. Last year, the company was supposed to lose $0.11 a share in the first quarter, but actually only lost $0.01.

What management says:
TiVo's management has said that it has been stepping up customer acquisition efforts, leading to increased net new subscriber counts but also to a higher cost per new subscriber. That trend is expected to continue throughout fiscal 2007 as the company fights tooth and nail to compete in an increasingly competitive entertainment marketplace.

Tom Rogers, president and CEO of TiVo, recently said, "Providing our users with a better, smarter way to enjoy their favorite television is at the core of what we do at TiVo and how we transform television viewing for consumers."

The service has a substantial and growing number of almost rabid fans, and the key to success for TiVo lies in continued growth in the user base -- no, make that "fan base."

What management does:
Gross margins are improving, showing that TiVo is doing well in commanding a premium price for a premium product. Operating and net margins are still deep in the red, but they're inching closer to breakeven. Keep that up for another year or so, and we may see a profitable TiVo in our lifetime.

Margins %

10/04

1/05

4/05

7/05

10/05

1/06

Gross

17.8

9.2

17

26.7

32.6

39.2

Op.

(34.5)

(43.3)

(34.7)

(29.4)

(17.3)

(19.1)

Net

(37.7)

(46.4)

(38.8)

(33)

(24.8)

(17.6)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
The company enjoyed some great news this quarter, seeing its very successful partnership with DirecTV (NYSE:DTV) -- which brings in the majority of TiVo's new customers -- in the same week as a court victory against the other major satellite TV provider, EchoStar (NASDAQ:DISH). The patent infringement decision against EchoStar, if upheld in the appeals that are sure to come, could give TiVo a great platform for demanding license payments from other DVR makers and providers.

TiVo has plenty of other balls in the air, too. A deal with privately held Brightcove will give users access to online videos through their TiVo boxes, in addition to the TV-delivered content. It's a way for TiVo to flex its video-on-demand muscles in preparation for the likely on-demand revolution. Through a new feature dubbed the Guru Guide, it's also pulling in recommendations from trusted third parties to guide its users to new content, and a long-awaited dual-tuner box has been released into the wild.

Keeping customers happy is paramount to a customer-centric company like TiVo. It looks like TiVo is hoping for some viral marketing, where happy users recommend the service to family and friends, reducing the reliance on marketing campaigns and partner agreements.

But all these balls that TiVo is juggling are long-term in range. Look for a steady ship, with TiVo growing its sales at a solid pace in tomorrow's earnings release, since none of the positive news has had a chance to filter down to the bottom line quite yet.

Competitors:

  • Cisco Systems (NASDAQ:CSCO)
  • Thomson S.A. (NYSE:TMS)
  • Microsoft (NASDAQ:MSFT)
  • Hauppauge Digital (NASDAQ:HAUP)

TiVo is a Motley Fool Stock Advisor selection, while Microsoft is a Motley Fool Inside Value pick. Take the newsletter of your choice for a 30-day free spin.

Fool contributor Anders Bylund owns none of the companies discussed, but his Scientific-Atlanta (nee Cisco) DVR has completely changed his and his family's TV viewing habits. Tune in to the Fool's disclosure rules today.