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Technology > Tech Biz
TiVo investors gird for earnings
Will the next earnings call be something they want to fast-forward through?
August 25, 2004: 3:20 PM EDT
By Eric Hellweg, CNN/Money contributing columnist

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BOSTON (CNN/Money) - It's too bad you can't use a TiVo to record the company's upcoming analysts' meeting, because the earnings call at the close of market Thursday will be of interest to investors and subscribers alike.

The second-quarter call should tell investors if the stock will continue its miserable run or start turning things around, and subscribers may hear the first specifics regarding the company's recently announced TiVo2Go service.

Since I last wrote about TiVo on Aug. 10 -- when I noted that it had reached two new 52-week lows -- the company has hit two more new 52-week lows.

And unlike the many unfairly drubbed tech companies recording new lows, TiVo seems to deserve its basement price. The company has yet to dictate a coherent strategy for how it will navigate the increasingly crowded digital video recorder market.

No amount of company news of late seems enough to turn around investor or analyst sentiment.

TiVo announced a strong distribution deal with Sam's Club, dropped the price of its entry-level unit to $99 after a rebate, launched a new marketing campaign, and was awarded a grant by the Federal Communications Commission to offer subscribers file-sharing capabilities for digital television content.

What's ahead?

So what more do these analysts want to hear? Most just want a clear plan for adding more customers.

That's critical because the company's partnership with DirecTV, which is responsible for bringing in most of TiVo's new customers, seems to be souring. The average revenue per user for these DirecTV customers dropped from $4.27 in January 2003 to $1.44 in April 2004.

"DirecTV is having a hard time getting compensated appropriately for what they've delivered," says Rob Sanderson, an analyst with American Technology Research.

"And going direct to consumer makes TiVo compete with cable, satellite, and eventually telcos, all of whom have better scale and stronger relationships with customers."

Analysts are also looking for guidance on how many subscribers TiVo has added through its deals with companies such as Pioneer and Toshiba. The two consumer electronics manufacturers are selling their own DVRs that include TiVo functions.

"I hope to see diversification of new subscriber sources, moving away from DirecTV," says Alan Bezoza, an analyst with Friedman Billings & Ramsey. "If 75 percent of their new subs still come from DirecTV, they could be in trouble."

Look behind the numbers

To create the kind of growth TiVo needs to remain viable, it must pursue these kinds of partnerships and buttress its direct sales efforts, while assiduously keeping its acquisition costs down.

TiVo Incorporated

Its two most obvious partnership choices -- cable and satellite companies -- are racing ahead to get their own DVR solutions into customers' living rooms.

TiVo has a history of blowing away analysts' estimates each quarter, which may tempt investors to get behind the stock. Before doing so, however, investors should look behind the numbers to see where the company's growth is originating.

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