TiVo quarterly loss narrows, sets new pricing plans
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March 8, 2006 Wednesday 8:25 PM EST
Carla Mozee, MarketWatch
From Lexis Nexis
TiVo Inc. Wednesday evening posted a narrower quarterly loss on higher revenue and outlined a new pricing structure aimed at attracting customers with plans that bundle equipment with service.
The plans will eliminate upfront hardware costs to customers and be based on one-, two-, or three-year commitments, the company said.
"After careful research and testing, we believe that the bundling of the TiVo service together with the TiVo box will be highly appealing to a certain segment of subscribers, particularly analog cable subscribers, which are a prime target for us," said TiVo Chief Executive Thomas Rogers during the company's conference call late Wednesday.
TiVo, which makes systems that allow television viewers to pause, replay, rewind and play back live shows, said its fourth-quarter net loss was $19.5 million, or 23 cents a share, compared with a loss of $33.7 million, or 42 cents a share, a year ago.
Analysts surveyed by Thomson First Call were expecting a per-share loss of 23 cents.
Net revenue was $60.1 million versus $59.4 million. Service and technology revenue rose 38% to $47 million from $34.2 million a year ago. Analysts were looking for revenue of $34 million.
TiVo also said it had its first positive cash flow operations in fiscal 2006 of $3.4 million compared with a negative cash flow of $37.2 million a year ago.
Tivo has been fighting increased competition from cable companies that are offering their own digital-video recording systems to subscribers.
During the fourth quarter, TiVo-owned subscription gross additions were 221,000, down from 276,000 a year ago, while subscription net additions came in at 183,000, down from 251,000.
TiVo said it added 173,000 subscriptions from DirecTV, compared with 447,000 last year. TiVo's results for the lower subscriptions from DirecTV were in line with its expectations.
A marketing deal between the companies is slated to end next year, and DirecTV has been providing its customers with DVR systems made by NDS Group Plc. (NNDS).TiVo CEO Rogers said it appeared that sales of its standalone box units were higher during the holiday season than those of boxes made by NDS.
TiVo reiterated its expectation to launch its DVR deal with Comcast later this year, while it continues "solid discussions" with other cable operators.
For the first quarter, TiVo forecast service and technology revenue of $48 million to $50 million, and a net loss of $19 million to $22 million. Wall Street is looking for first-quarter revenue of $50 million.
The company said its loss forecast includes legal expenses related to its patent litigation against EchoStar Communications (DISH) and the rollout of its new pricing plans, among other items.
TiVo said during the call that a jury has been selected for the EchoStar trial, which is expected to begin at the end of the month.
New pricing plan
The Alviso, Calif.-based company said it will, for the first time, sell its service and equipment together, and eliminate separate pricing for its boxes and service.
One year of service will cost $19.95 a month, or $224 on a prepaid basis; two years will cost $18.95 monthly or $369 prepaid; and three years will cost $16.95 monthly or $469 prepaid.
"On the face of it, it looks attractive," said Daniel Ernst, an analyst at Soleil-Hudson Square Research in New York, of the bundled plans.
"They're going after the mainstream part of the market," said Ernst, who added that the move is similar to those of mobile phone companies, which found that prepaid cell phones "get more average consumers involved in the market."
The bundled plans will be sold through TiVo's direct sales channel, and will be launched next week. The new pricing structure won't affect TiVo's current subscription base, it said.
Shares of TiVo lost 10 cents, or 1.7%, to close at $5.75 ahead of the announcement.