TiVo, Inc. (NASDAQ: TIVO) invented the Digital Video Recorder (DVR) that records TV programs and lets you fast forward through commercials. If there ever was a disruptive technology, the DVR is it -- it disrupts scheduled TV and the related advertising revenues that pay for it. So the TV broadcasters have fought back, and the question for investors is whether TiVo's response to that retaliation makes it an attractive investment.
There are five reasons that TiVo might be worth a look:
Despite these positives, there are other factors to consider. TiVo has lost market share to the cable and satellite companies who offer for free -- or at a very low price -- a stripped down DVR. But TiVo believes that it will regain market share through those software-DVR partnerships. It also thinks that with the growing number of content sources -- up to 300 cable channels, 12,000 movies available through its Netflix, Inc. (NASDAQ: NFLX) partnership and so on -- that TiVo's search function does a much better job than competitors of helping consumers organize their content.
Assuming forecasts are correct, TiVo is expected to lose 4 cents a share in its fiscal year (FYE) ending January 2009 and 6 cents a share for the FYE January 2010. The stock -- which has been up 1% in the last year during which time the S&P 500 fell about 38% -- has held up relatively well. And the stock is up 34.3% in the last three months.
But with losses forecast for the next year, the question for investors is whether that recent burst in stock price reflects the five positives or whether they will yield future positive surprises that will boost TiVo stock even further.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. Portfolio recently published his eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.
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