Copyright 2003 TheStreet.com Inc.
September 25, 2003 Thursday
TiVo slid 10 percent Thursday as investors mulled over threats to the digital video recorder company's business.
Thursday's selloff followed two separate unencouraging reports with possible bearing on the Alviso, Calif., tech shop. One is a research note questioning the longevity of TiVo's relationship with one of its major licensees: the direct broadcast satellite operator DirecTV, owned by Hughes Electronics.
The other development is news, issued earlier this week, that another TiVo licensee, the Japanese consumer electronics giant Sony, will soon roll out in the U.S. a handheld video recorder. A TiVo spokesman said Thursday he did not believe the new product would be a TiVo-licensed product.
TiVo enjoys a rabid following among users, but its continuing losses have generated a less enthusiastic response in the stock market. Shares in TiVo, which have rallied sharply this year amid a broad tech stock resurgence, dropped 97 cents to $8.79.
Rank and File
In a note published Thursday morning, Pacific Crest Securities analyst Jeff Goverman raised the possibility that TiVo's relationship with DirecTV — the expected source, he says, of half of TiVo's subscribers going forward — could go sour upon the impending takeover of DirecTV by Rupert Murdoch's News Corp.
Citing a filing that News Corp. made at the Federal Communications Commission this week in anticipation of a News Corp.-Hughes merger, Goverman says News Corp.'s commitment to TiVo is "questionable." The analyst points out that News Corp.'s BSkyB European satellite service was a onetime partner of TiVo's, but then started marketing a competitive digital video recorder. Judging from News Corp.'s filing, writes Goverman, the company's past successes in the satellite business "will be a large part of the new blueprint."
Good Reception TiVo's 2003 jump
Goverman has a buy rating on TiVo; his firm hasn't done banking for the company. Goverman's report is "the rankest form of speculation," said the TiVo spokesman Thursday. "The business relationship between these two companies is extremely strong."
Separately, investors puzzled over Sony's Tuesday press release about the Clie Pega-VR100K, which poses the latest in a long line of threats to TiVo's TV-recorder box. Sony's device, connected to a TV or cable box via coaxial cable, records more than four hours of television on memory stick cards. The recorded videos can be viewed on a TV, PC or a Clie handheld device. The box will cost $300, Sony said.
"The Clie handheld's value lies in its endless multimedia capabilities," Sony said in a press release Tuesday. "Digital video recorders allow people to view TV and cable programs at anytime. We're adding a new facet to that possibility by enabling people to view those shows anywhere."
Sony's entry into the so-called DVR market only further clutters the TiVo story. TiVo sells its recorders for around $200 and up, and licenses its technology to third parties, including DirecTV, Sony and Toshiba. TiVo makes much of its money selling monthly subscriptions to its automatic recording service.
But that model has already been threatened from multiple sides, most notably by direct broadcaster EchoStar, which has started giving away non-TiVo DVRs to its satellite subscribers.
Another threat comes from TiVo's bottom line, which continues to ooze red despite a steadily growing subscriber list. In the latest quarter, TiVo lost $4.4 million on $17.4 million in sales, even as the subscriber rolls expanded by some 90,000.