TiVo (TIVO) Misses on Earnings but Beats on Revenue, Shares Slip

Shares of digital television recording service TiVo (TIVO: Charts, News) stumbled this week after the company reported a disappointing first quarter loss that missed analysts' estimates. For the quarter, TiVo reported a loss of 17 cents per share, or $20.8 million, on revenue of $67.8 million.

A year earlier, the company posted a profit of $1.04 per share, or $139 million. Revenue rose 48%. Analysts had expected TiVo to post a loss of 15 cents per share on revenue of $55.3 million.

The company attributed its weak profit to increased litigation and marketing expenses. These expenses are expected to continue weighing on the company's bottom line in the second quarter as well. For the second quarter, TiVo expects to post a loss between $28 million to $30 million on revenue between $53 million to $55 million. Analysts had forecast a smaller loss of $16 million on higher revenue of $56 million.

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Over the past three months, TiVo shares have declined more than 30%. Shares peaked at $58 per share in 2000, shortly before the dot-com crash, but now trades for around $8. The company has posted losses since the second half of 2009 due to rising costs and a declining subscriber base. TiVo managed to curb its slide in the prior year, when it won a $500 million settlement from Dish Network DISH and Echostar SATS over a seven-year patent dispute regarding its digital video recording technology. This far reaching deal also forced AT&T T to pay TiVo at least $215 for the use of its technology through June 2018. TiVo also mutually ended its patent battle against Microsoft.

TiVo is now engaged in a costly patent battle with Verizon Communications (VZ: Charts, News), which exacerbated the company's quarterly loss. TiVo CEO Tom Rogers stated that despite the expensive legal battle with Verizon, he believes that the company will "do really well" in the second quarter. Rogers noted that TiVo would have met analysts' forecasts if litigation expenses had been lower.

TiVo's gross margin increased from 46.1% to 51.1%. Meanwhile, the number of cancellations decreased from 2.3% to 1.6%. In addition, TiVo added 206,000 subscribers, better than the loss of 88,000 a year earlier but a slight step back from the 234,000 it added in the fourth quarter. Rogers optimistically stated that the company expects to add over a million subscribers in 2012. These positive factors have led Rogers to point out that the company is slowly edging back to the black. Although Rogers declined to offer an exact time frame, he stated, "The underlying trends and the growth opportunity remain strong."

TiVo's efforts to spread its devices to more pay-TV operators have helped the company to increase its subscription base substantially. TiVo's recorded subscriber base has risen over the past three quarters.

TiVo has added new products, such as Internet-ready set top boxes, set top boxes without built-in DVRs, and media streaming devices for smart mobile devices, in order to remain competitive with other on-demand content providers. Competitors such as Netflix (NFLX: Charts, News), Amazon (AMZN: Charts, News), Coinstar (CSTR: Charts, News) and Hulu have been changing streaming technology over the past five years, and smart televisions from Samsung and Apple (AAPL: Charts, News), due this year, are likely to further disrupt the dynamic between the Internet and television services.

Technical indicators suggest further downside for TiVo shares, which have fallen below their 50-day, 100-day, and 200-day averages, but are approaching the low end of their 52-week range of $7.06 to $12.37.

Other News About TIVO

Tivo Announces Earnings A look at TiVo's mixed earnings.
TiVo swings to $20.8M 1Q loss TiVo misses on earnings but beats on revenue.

Other Stocks in the News

Netflix settles lawsuit, agrees to delete past users' viewing history Netflix finds itself in the crosshairs of privacy watchdogs.
Microsoft Recruits Designers in Race for Windows Apps Microsoft plays catch up with Apple and Google.

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Published on Jun 1, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2016. Content published with author's permission.

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