Digital video recorder pioneer TiVo shows another profit, but outlook weak

By Anick Jesdanun, The Associated Press

NEW YORK - TiVo Inc. posted a quarterly profit for only the third time in its 11-year history Wednesday as the pioneer in digital video recorders boosted margins on hardware and reduced marketing costs in its fiscal second quarter.

It was also the first time TiVo had back-to-back quarters of profits. The Alviso, Calif.-based company reported US$2.9 million in net income, or three cents per share, compared with a loss of $17.7 million, or 18 cents a share, in the year-ago period.

Analysts polled by Thomson Reuters had expected a loss of two cents per share in the quarter that ended July 31.

However, Tivo shares fell sharply in extended trading after the company said its revenue in the current quarter will fall short of analysts' current expectations, at $49 million to $51 million. Analysts polled by Thomson Reuters had expected $57 million.

TiVo also said it expected a net loss in the range of $7 million to $9 million in this quarter.

Shares in TiVo dropped 41 cents, more than five per cent, to $7.55 in extended trading. Before the earnings report the stock had risen 5.7 per cent to close at $7.96.

In the just-concluded period, TiVo's revenue rose four per cent to $65.2 million, including $53.5 million in services and technology. The breakout for services and technology, which excludes hardware sales, was below the nearly $55.4 million analysts were expecting and short of the $56.5 million in the same period last year.

TiVo's subscriber base has been dropping because of increased competition from generic recorders from cable and satellite operators, and the company has been focusing on reducing subscriber acquisition costs to offset the revenue decrease.

The average cost was $135 in the quarter, slightly up from $116 in the previous period and significantly lower than the $758 in the year-ago period. TiVo said it now has 3.6 million subscribers, compared with 4.2 million a year ago.

In an interview, TiVo chief executive Tom Rogers said the slight quarter-to-quarter increase resulted from seasonal variations, including heavier marketing for Mother's Day, Father's Day and graduation.

TiVo said distribution partner Comcast Corp. has expanded a TiVo package to Connecticut, beyond an initial deployment in Massachusetts and New Hampshire. Rogers said full marketing should begin this year, allowing TiVo to boost subscribers while Comcast bears much of the marketing expenses.

Deployment by another cable partner, Cox Communications Inc., should also begin by year's end, while Seven Media Group has introduced TiVo to the Australian market.

"Over time, the subscriber growth will be much more a function of cable and international distribution deals," Rogers said. "We've had a real focus on trying to drive our subscriber acquisition cost numbers down. A lot of that is being able to develop better opportunities for third parties to market us."