TiVo Earns It

By Rick Aristotle Munarriz
May 29, 2008 | Comments (2)

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If TiVo (Nasdaq: TIVO) is going places, why does it always seem to be standing still?

Last night's quarterly report for the DVR dynamo was a mixed bag. Service and technology revenue fell by 5.6% to $54.9 million, but TiVo's $0.04-a-share profit is a new record, clocking in well ahead of the penny-per-share loss that Mr. Market was betting on. The company closed out Q1 with 1.7 million TiVo-owned subscribers, identical with its TiVo-owned count a year ago, but at least the mere $116 in subscriber acquisition costs is the company's lowest such figure in three years.

As a shareholder and longtime TiVo subscriber, I'm torn. The company is certainly doing some pretty cool things with its digital video recorder boxes and patent-rich portfolio. Last year, the company launched several bold moves, like teaming up with Amazon.com (Nasdaq: AMZN) to deliver Unbox video downloads and rentals directly into TiVo, or licensing its killer-app DVR software through cable providers like Cox and Comcast (Nasdaq: CMCSA).

Just this week alone, TiVo announced deals to start delivering Disney (NYSE: DIS) flicks and Chicago Tribune TV critic recommendations directly to TiVo subscribers. This is just more gravy on top of deals struck earlier this year, which will deliver Google (Nasdaq: GOOG) YouTube clips and RealNetworks (Nasdaq: RNWK) music into the DVR pioneer's appliance

I get the buzz behind all of this, but why am I staring at the same 1.7 million TiVo-owned subscribers the company had a year ago -- down slightly from its subscriber count just three months earlier? I understand that the 2.1 million other TiVo box owners, primarily legacy users from DIRECTV (NYSE: DTV) before the satellite television beamer decided to make its own DVRs, will continue to dwindle. I just don't get why TiVo-owned subscribers keep bolting at roughly the same rate that they're arriving.

Last night's profit is good. The current quarter won't be quite so rosy -- the company projects a small loss, but still expects a profit on an adjusted EBITDA basis -- but I'll take it.

I just keep waiting for TiVo to become a growth company again. A laundry list of cool features and media partners isn't doing the trick.

I've seen TiVo do so many things -- and log so many intellectual-capital miles -- but at the end of the day, the company still has to stop running in circles.

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Longtime Fool contributor Rick Munarriz does love his TiVo, and he does own shares in TiVo and Disney. He is also part of the Rule Breakers newsletter research team, seeking tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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  • Report this Comment On May 29, 2008, at 5:55 PM, mainerayah wrote:

    Perhaps the problem is that it is too easy for all the cable and satellite providers that are underselling TiVo to do so because they are not paying licensing fees to the patent holder of the technology they are pirating. Maybe in the next few days we will see the playing field leveled a bit with EchoStar being held in contempt of court for ignoring an injunction. That will send a message to the rest of the infringers out there.

  • Report this Comment On May 31, 2008, at 9:17 PM, mgiv wrote:

    The problem TiVo will always face is that you need to plug into a service provider in order to get TiVo. And the service provider will always be able to under cut them by bundling similar TiVo like services with their digital receivers. The technology is mundane. Software is so pliable these things can be provided using off the shelf open source software. To say TiVo's court case has merit would be to say it is illegal to plug your computer into a television set. That said to all you would be investors, please save your money.

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