TiVo Inc. (TIVO): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
TiVo's third-quarter fiscal 2015 earnings missed the Zacks Consensus Estimate as well as witnessed a year over year fall of 33.3%. The decline was mainly due to higher interest expenses and provision for income taxes. Despite this, we remain optimistic about its future prospects due to sustained focus on product innovations and subscriber acquisition. We believe that TiVo has significant growth opportunities in Western Europe and Latin America, given its partnerships with local providers. The strong balance sheet will also enable it to pursue strategic acquisitions and aggressive share buyback programs, thereby boosting near-term growth. However, increasing competition from the likes of Dish Network and Cablevision Systems Corp. seems to be the primary headwind in the near term. Thus, we reiterate our Neutral recommendation on TiVo.

Overview:

Headquartered in San Jose, CA, TiVo Inc. (TIVO) primarily develops software and technology that powers digital video recorders (DVRs), traditional set-top boxes, computers, tablets and smartphones to search, navigate and access content from different sources, including live television, video-on-demand and broadband video. The company also provides advertising solutions for the media industry and audience measurement services.

TiVo reported revenues of $406.3 million in fiscal 2014. The company's most significant source of revenue is consumers who directly subscribe to TiVo services for a monthly fee that enables them to record, watch and control live television. The company also offers an option to prepay TiVo services for one to three years. The company reaches consumers through distribution relationships with major retailers, including Best Buy, and through its online store at TiVo.com.

The company works with satellite television providers, which pay monthly fees to offer TiVo services to their subscribers. TiVo works directly with television advertisers and offers a variety of solutions for the television advertising market. These include short- and long-form video advertising, audience research measurement, lead generation and commerce.

TiVo also provides an audience research measurement service. As part of its efforts to gain significant market share, the company acquired TRA Global during fiscal 2013 and renamed it TiVo Research and Analytics, Inc. (TRA). Post litigation settlements with DISH, AT&T and Verizon, TiVo earns licensing revenues.

The company reports revenues under three heads. Services include revenues from recurring and prepaid subscription plans for TiVo service and fees received from the sale of advertising and audience research measurement services. Service revenues also include fees received from multiple system operators (MSOs). The company generates Technology revenues from licensing technology and professional engineering services. In addition, TiVo generates revenues from the sale of Hardware products that provide TiVo services.

In order to broaden its product and service portfolio, TiVo acquired DigitalSmiths Corporation in Feb 2014.

TiVo faces significant competition from services sold directly by cable, telecommunications, and satellite operators including DISH, DIRECTV, Comcast, Time Warner Cable, Verizon, and AT&T. The company also competes with Microsoft, Cisco, Arris and Rovi, which offer identical products that provide user interface software for use on television set-top boxes and consumer electronic devices.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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