TiVo (TIVO) Stays in the Red as Operating Expenses Increase

Shares of digital video company TiVo (TIVO: Charts, News) plunged on Thursday after the company posted disappointing quarterly results weighed down by heavy expenses. For the second quarter, the Alviso, California-based company posted a loss of 23 cents per share, 0r $27.7 million, a decline from a loss of 17 cents per share, or $19.6 million, a year earlier.

Analysts had expected a wider loss of 24 cents per share. Looking forward, TiVo expects a net loss between $27 million and $29 million for the third quarter, due to a patent lawsuit against Verizon Communications, which is set to start in October. This expected loss is far higher than the $19.8 million loss projected by analysts. TiVo stated that it planned to "make progress" towards breaking even by the end of the fiscal year, since research costs are expected to decline in the second half of the year. Daily Chart
Revenue rose 7% to $65.25 million. Operating expenses rose 22%. However, total cable and satellite subscribers rose by 253,000 during the quarter, compared to a meager gain of 10,000 subscribers in the prior year quarter. Despite weak quarterly results, TiVo received a rare vote of confidence when hedge fund SAC Capital, led by famed manager Steve Cohen, increased its stake in TiVo to 5.2%, or approximately 6.46 million shares. At least one analyst, Todd Mitchell at Brean Murray, Carret & Co., was bullish, stating that "TiVo is executing well and it should become more apparent in fiscal 2014." Mitchell expects TiVo to add 258,000 new subscribers in the third quarter, coming in at over a million for the full fiscal year. His firm currently rates the stock a "Buy" with a price target of $14. TiVo's flagship set-top boxes have gradually evolved from digital video recorders to full-featured Internet-enabled boxes that stream Internet content from Netflix (NFLX: Charts, News) and other video services. Cable operators are now licensing TiVo's technology in its own set-top boxes as well. Last week, Anchorage, Alaska-based General Communication (GNCMA: Charts, News) became the latest cable operator to integrate TiVo's technology into its own set-top units. Cable giant Comcast (CMCSA: Charts, News) will start offering TiVo services in Sacramento, Portland, Denver and additional markets starting this year. Gross profit rose 9.4% to $38.2 million. Meanwhile, gross margin widened 150 basis points to 58.5%, due to lower service and technology costs, which offset large cost increases in hardware costs. Operating expenses rose 21.6% to $64.7 million. General and administrative expenses soared 42.7%, while sales and marketing costs edged up 4.9%. CEO Tom Rogers stressed the importance of broadband cable and Internet connections, even in tough economic times. "Broadband is one of those things that people are finding room for in their budgets, and what TiVo does is bring the benefits of broadband video to the television," stated Rogers in an interview. On September 6, TiVo intends to sell a new $130 Stream add-on box, which allows set-top boxes to stream media to mobile devices, such as smartphones and tablets. Shares of TiVo trade with a negative 5-year PEG ratio of -0.36, due to its lack of profits. The stock does not pay a dividend. The stock has slid 15.6% over the past twelve months. Other News About TIVO TiVo's Loss Is Smaller Than Estimates on Subscriber Gains TiVo barely beats on the bottom line. TiVo Reports Dismal 2Q TiVo's poor earnings disappoint investors. Other Stocks in the News Kindle Fire Sells Out Ahead of Amazon Event Amazon's Kindle Fire still burns hot. Sears Gains 5% on Spinoff Update Sears' investors hope that a spinoff will revive this broken stock. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 31, 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.

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