Just because TiVo (Nasdaq: TIVO ) is shrinking, don't assume it's getting smaller.
Sure, the patent-clutching pioneer of DVR technology shrank in its latest quarter. Service and technology revenue fell to $48.8 million after clocking in at $53.5 million during last year's fiscal second quarter. Last year's profit of $0.03 a share was this time imprisoned by parentheses, showing up as a deficit of $0.03 a share.
There just aren't as many TiVo owners as there used to be. TiVo now claims just shy of 3.1 million subscribers, well short of the 3.6 million users it had on board a year ago. Most of the defectors have gone to third-party deals with broadcasters and cable providers such as DirecTV (NYSE: DTV ) and Comcast (Nasdaq: CMCSA ) .
However, TiVo is also shedding direct subscribers. It lost more than twice as many TiVo-owned accounts as it signed up during the past three months, and it finished the quarter ended in July with 42,000 fewer subscribers than when it started.
Things won't get a lot better in the near term, as TiVo sees a likely end to its streak of eight consecutive quarters of positive adjusted EBITDA during the current quarter.
So why isn't TiVo getting smaller? Well, for starters, revenue is inching higher sequentially. There are also market-expansion deals in the works with Comcast and other cable providers. Its marketing alliance with Best Buy (NYSE: BBY ) kicks in next year, and it won't hurt to have the country's leading consumer-electronics chain as a TiVo box marketer.
It's also getting to the point where DISH Network (Nasdaq: DISH ) is running out of appellate excuses to delay forking over beefy judgments as a result of trampling TiVo's intellectual property. DISH has won a patent re-examination, but TiVo has won every step of the way so far.
TiVo isn't stopping with DISH. It filed lawsuits last night against AT&T (NYSE: T ) and Verizon (NYSE: VZ ) . TiVo's claims state that both of the telco giants looking to make a splash in digital television are ripping off three of TiVo's patents.
I'm no attorney, but it's getting to the point at which it's a lot easier to partner with TiVo -- as DirecTV and Comcast have -- than to see it in court.
With TiVo shares breaking into the double digits this summer for the first time in more than five years, I guess I should be happy that I'm long TiVo instead of selling it short.
More tales of the TiVo-lution:
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