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Analysts Upbeat on TiVo Turnaround

3 Apr, 2012 By: Erik Gruenwedel

Fortunes for digital video recording pioneer TiVo appear to be on the upswing following successful litigation results and growing demand for the company’s vaunted user menus and program guides, among other factors.

Analyst Eric Wold with B. Riley & Co. in Los Angeles added TiVo to his “focus list” after determining the service could generate greater-than-projected subscriber gains following license deals with Virgin Media and other multichannel video program distributors (MVPDs).

Andy Hargreaves with Pacific Crest initiated coverage of TiVo April 2, stating in a note the company is “well on its way to establishing a stable and profitable business in licensing and software sales.”

With a surge in video-on-demand programming through the Internet offered by MVPDs in response to consumer migration and media hype surrounding subscription video-on-demand platforms such as Netflix, Hulu Plus and Amazon Prime, TiVo has found that its technology allowing consumers to better navigate, store and recall myriad programming options on TV and over-the-top services is in great demand.

As a result, instead of focusing a business model predicated on subscribers, Alviso, Calif.-based TiVo has begun licensing its DVR technology to third parties, in addition to winning separate DVR patent infringement and related technology claims against Dish/EchoStar, Microsoft and Verizon.

Indeed, intellectual property settlements have generated more than $800 million for TiVo, including most recently a $215 million agreement with AT&T with “potential for upside,” according to a company statement.

“We estimate that the addition of future settlement payments from Verizon could move TiVo into positive [pre-tax earnings] territory this calendar year,” Wold wrote in an April 3 note.

In addition to Virgin Media, which added 407,000 subscribers to TiVo MVPD business, TiVo is licensing technology to Charter Communications, Suddenlink, Ono, Grande and RCN, which combined account for more than 10 million monthly subs, according to Hargeaves.

“We expect TiVo’s relative success at these new customers to be the primary determinant of the company’s total subscriber base as well as its revenue and profitability through [fiscal 2013],” he wrote. “TiVo’s ability to build on its current momentum and add new MSO customers will determine its growth rate after that.”

TiVo, which is expected to generate $274 million in revenue this year, reported net income of $102.2 million in its most recent fiscal period and year (ended Jan. 31).

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