Dueling Fools: TiVo Bull Rebuttal

".TiVo's dependence upon DirecTV as a source of customers will become a liability." -- Rich Smith, five minutes ago

Thanks, emcee Rich. That's the setup I was hoping for.

Introducing Comcast
Rich's argument discounts Comcast (NASDAQ:CMCSA), and that's a mistake. Let's do the math: As of the most recent quarter, TiVo (NASDAQ:TIVO) had 4 million customers. DirecTV (NYSE:DTV) -- which itself ended 2005 with 15.1 million subscribers -- owned 2.7 million of those. In other words, TiVo users account for 17.9% of DirecTV's subscriber base.

Now, consider Comcast: It ended 2005 with 21.5 million subscribers. Penetrating 17.9% of its customer base would bring TiVo 3.8 million users. Nothing against DirecTV, but TiVo is trading up in terms of its overall opportunity.

We need more popcorn
Of course, this assumes that the DirecTiVo crowd actually agrees to be moved over to NDS. That's a stretch, at best. Few devices this side of Apple's (NASDAQ:AAPL) iPod have inspired as much devotion as the TiVo. Accordingly, "churn" -- the rate at which existing subscribers cancel and become replaced by new customers -- has historically been 1% or lower. It's still that way. Do you really expect things to change when DirecTV offers an NDS (NASDAQ:NNDS) player? Not... bloody... likely.

Give it two thumbs up!
But neither of these points matters much in the final analysis. This does: TiVo has two really spectacular opportunities to generate growth.

First, researcher Carmel Group estimates that the total DVR market, including both hardware and software, will reach $5.5 billion by 2010. At just 15% of the market, TiVo would be bringing in $825 million annually. Match sales to market value, and the stock would be a double from today's levels.

Second, Madison Avenue wants and needs TiVo, while the big techs need a gateway that connects the Web and TV for targeted ads. They can build it, of course. Or they could save the time and buy TiVo for about $1 billion. That's much more likely, and it would give shareholders a double from today's levels.

This isn't a Motley Fool Stock Advisor pick because the show's over, Rich. In fact, it's just beginning. Curtain, please.

Wait! You're not done. Go back and read the other arguments, then vote on the winner of this week's Duel.

Fool contributor Tim Beyers pines for a real TiVo daily. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Fool profile . The Motley Fool has an ironclad disclosure policy .