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The digital video recording pioneer's first-quarter results run against the trend, and not in a good way. Sales fell 10% year over year to $54.9 million and last year's $0.04 of earnings per share turned into $0.04 of losses per share. TiVo has 16% fewer paying customers now than they did a year ago amid a monthly 1.4% churn rate (or about 4.3% per quarter). No respect.
This comes at a time when DVD mailer Netflix (Nasdaq: NFLX ) is beating expectations and raising targets, DirecTV (Nasdaq: DTV ) and the cable guys keep growing their TV subscriber counts comfortably despite the recession, and entertainment seems like the last safe haven in this stormy recession.
TiVo CEO Tom Rogers says that he's suffering from a marketing problem. "The biggest confusion that's been sowed out there in the marketplace about TiVo is that the cable industry generic DVR is the equivalent," Rogers told analysts in the earnings call.
The challenge right now is to spread the word that a recent-generation TiVo that connects both to your TV signal feed and to a broadband Internet connection can do much more than a generic DVR. Through partnerships with Amazon.com (Nasdaq: AMZN ) , Netflix, and Blockbuster (NYSE: BBI ) , TiVo subscribers can access a smorgasbord of streamed or downloaded movies.
Another recent deal with on-demand expert SeaChange International (Nasdaq: SEAC ) lets some TiVo users access their participating cable provider's on-demand videos without a separate set-top box for that. That could remove the last roadblocks to shipping out TiVo boxes instead of the usual Motorola (NYSE: MOT ) or Scientific Atlanta boxes to cable subscribers' living rooms.
But these advantages are not obvious to a consumer who already talks about TiVoing "American Idol" on his no-name DVR, provided by the cable company. And the SeaChange partnership is too new to have produced any revenue-making cable contracts yet. No respect.
But TiVo's balance sheet looks debt-free, cash-rich, and very healthy. Despite the GAAP losses, the company actually saw $3.4 million of positive free cash flows this quarter. There may be legal windfalls waiting around the corner, and brand-new distribution deals feeding off of that. Oh yes, I think TiVo will do just fine -- even if nobody respects 'em right now.
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