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Is TiVo Finally Back?

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Don't read too much into the record profitability at TiVo (Nasdaq: TIVO  ) in last night's quarterly report. If it wasn't for DISH Network (Nasdaq: DISH  ) finally paying up after years of trampling over the DVR pioneer's patents, we'd actually be discussing TiVo's 10th consecutive quarterly deficit.

We still have familiar problems at TiVo. The net subscriber count keeps slipping. The model itself isn't profitable. Some people still haven't gotten around to catching the disappointing House finale that they TiVo'd on Monday night.

The DISH trickle will help ease some of those concerns. Collecting $175.7 million in monetary damages that will exceed $600 million over the next few years -- and paying minimal income taxes after more than two years of accumulated deficits -- will numb the throbbing like a shot of Patron tequila at a techno club. TiVo is also actively going after AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) for violating its DVR patents with their fledgling broadband-based television services, though success is anything but assured and the potential sums are based on little more than guesswork at this point.

Moving on to the business that TiVo does control, it continues to slip -- though not as badly as Wall Street and TiVo earlier feared. Service and technology revenue slipped 10% to $38.8 million, ahead of both its original range of $36 million to $38 million and the $37.2 million that analysts were targeting.

There are now less than 2 million TiVo subscribers out there. The company shed 88,000 net subscribers during the past three months -- and a whopping 548,000 over the past year.

If it seems as if subscriber shrinkage is moving a lot faster than TiVo's revenue, you've actually stumbled across an encouraging metric. The average monthly revenue that TiVo is milking out of each subscriber -- whether it's one of the 1.2 million couch potatoes that it directly services or the balance that come through its third-party partners -- is up nicely over the past year.

Lazard Capital Markets did upgrade the stock after the report, introducing a $13 price target.

TiVo still has a long way to go. Its guidance calls for more red ink during the current quarter. However, its revenue outlook and projected deficit is better than what Wall Street was banking on this time.

TiVo's "profitable" quarter may be a facade, but it may not be as far as worrywarts believe from turning the corner.

What will it take for TiVo to win back its Mojo? Share your thoughts in the comment box below.

Motley Fool newsletter services have recommended buying shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

Longtime Fool contributor Rick Munarriz thinks life is too short to not fly past unwanted commercials on TV. He does not own shares in any of the stocks in this article, though he does have a pair of TiVo boxes with lifetime subscriptions in his home. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (3)

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  • Report this Comment On May 25, 2011, at 12:55 PM, goyals3 wrote:

    TIVO's vicotry and ability to buyback shares is a huge confidence to the Company. The Shorts have really overlived in this stock and the above comentary is all the same that we continue to hear the negative. TIVO is to TV what Apple is to Cell phone. TIVO is a major pipe of internet control into the TV.

    This is the next frontier on the platfrom for apps and gagets to built on. TIVO would be a great add to many companies Comcast/Google/Aplle and many others. The stock is much too undervalued and takeout would happen at much higher levels. The stock is a quadruple to much more in a take out at $40+. Long TIVO! and have confidence this company will be huge.

  • Report this Comment On May 25, 2011, at 6:04 PM, RodgerKing wrote:

    TIVO has two things going for it.

    1) TIVO's time-warp patent has won against Dish, it should have an easier time with its patent infringement cases against Verizon and AT&T. When TIVO wins these suits you won't be able to fast-forward through a commercial without paying TIVO in one form or another.

    2) Cable operators need TIVO now. With so many people giving up their cable connection and hooking their TV to their computer, TIVO gives the cable operator a huge weapon to fight back. Once again, won't you pay $20 a month not to watch a commercial.

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