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.
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
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
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