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TiVo's Task: It Must Prove Its Relevance

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TiVo (NASDAQ: TIVO  ) has the burden of showing Wall Street analysts that its favorable second-quarter numbers can be sustained over time -- and that it can generate a favorable buzz in the ever-changing media ecosystem.

Additionally, TiVo needs to convince the world that its once cutting-edge brand name can stand for something profound in the future.

TiVo is hardly the first company to face the burden of remaining relevant at a time when the world's and the media's technology are promoting competition. AOL, for example, has faced the same kind of challenge of proving it still has a valid place and has not always been able to persuade Wall Street that it has progressed beyond the dial-up reputation it has gained. It remains to be seen whether TiVo will fare any better.

What can the company do? TiVo should bolster its marketing, for sure, as a way to convince investors that its best days are ahead, and not behind. It boils down to a matter of perception and how the marketplace regards TiVo. This will require a sense of ingenuity and creativity and an admission that it recognizes that it needs to alter the public's view of it.

For instance, when I want to record a program on my television set, I think immediately of "DVR-ing" it -- not "TiVo-ing" it. I suspect that I'm not alone. The lexicon is a tip-off. So much of a media/tech company's success nowadays depends on the level of its buzz, which hinges on its image.

Prospective investors and customers alike won't jump on the TiVo bandwagon freely. They don't have to. There is so much competition now for TiVo, in terms of obtaining the public's eyeballs and keeping them, that the company has to be better than its foes at winning the people over -- because TiVo no longer has a strong buzz in the media or tech community.

The digital-video recorder trailblazer recently recorded a second-quarter profit of $268.9 million, sparked by favorable legal settlements. Management expects the good results to continue through 2013 and into fiscal 2015.

As a plus, the company is riding a nice wave these days. TiVo came in with net income of $1.96 per share, encompassing $490 million drawn from lawsuits with Cisco Systems and Google's Motorola Mobility, TiVo said in a press release. This performance contrasted with a loss of $27.7 million, or $0.23 a share, last year.

According to Bloomberg, TiVo has garnered roughly $1.6 billion from lawsuits over the employment of its technology. The company has said that these newest legal agreements will raise its licensing revenue going forward, and it believes that this will ease the way for continuing profitability. 

TiVo now believes that it is silencing the naysayers that have dogged it over the years. Its sales jumped 53% to $100.1 million in the quarter ended in July, versus analysts' average estimates of $86.4 million.

The Fool's Anders Bylund echoed the good spirit coming from TiVo in an Aug. 29 piece, noting that the company "is all done reenacting courtroom dramas like L.A. Law and Perry Mason. The future is a brand-new show, with the focus squarely on the viewer. That's a good thing."

Once, TiVo's brand name stood for something -- innovation, being on the tech cutting edge and a farsightedness in understanding consumer needs. The mobile movement has taken the spotlight out of the home and placed it in the user's pocket or backpack.

TiVo must prove that it can once again excite customers with its innovation.

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9/30/2016 4:00 PM
TIVO $19.48 Down -0.58 -2.89%
TiVo CAPS Rating: **