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TiVo Records Wider Loss

Executives say heavy advertising and a rebate program paid off with new subscribers but hit the firm's bottom line.

March 11, 2005|Alex Pham | Times Staff Writer

TiVo Inc.'s loss more than doubled in 2004, but so did its subscribers as the pioneering maker of digital video recorders continued its struggle to break even by the end of this fiscal year.

The Alviso, Calif.-based company Thursday posted a loss of $33.7 million, or 42 cents a share, on sales of $59.4 million for its fourth quarter ended Jan. 31. It lost $12.4 million, or 18 cents, on revenue of $42.6 million in the same quarter a year earlier. The most recent results included a one-time $3.2-million charge to pay off debt.

For the fiscal year, TiVo recorded a loss of $79.8 million, or 99 cents a share, on revenue of $172.1 million. It lost $32 million, or 48 cents, on revenue of $141.1 million a year earlier.

The company's losses were in line with the expectations of analysts polled by Thomson First Call.

TiVo executives blamed the losses on the company's efforts to win subscribers with heavy advertising and a rebate program that effectively halved the price of its entry-level recorders to less than $100. Marketing and advertising expenses rose to $11.5 million in the fourth quarter, up from $4.7 million a year earlier.

Those investments helped TiVo double its subscribers to more than 3 million at the end of January, up from 1.3 million a year earlier.

However, TiVo vowed to dramatically curtail such expenses to become profitable by the end of its current fiscal year. It has not seen a profit since going public in 1999.

"We're entering a new phase of TiVo's evolution," Chairman Mike Ramsay said in a conference call with analysts. "This year is all about the bottom line."

The company, executives said, will focus on servicing its existing subscribers, who pay monthly fees to get TiVo's service. But not all TiVo subscribers are the same. Only about 38% pay $12.95 a month directly to TiVo. The remainder subscribe through DirecTV, a satellite TV company that last year paid TiVo an average of $1.25 a month for each subscriber.

Still, with a customer turnover rate of less than 1% a month, TiVo is betting that it can ride its current subscriber base to profitability.

"Our primary focus last year was subscriber growth," TiVo Chief Financial Officer David Courtney told analysts. "Our model is changing this year. We have a much larger base of recurring revenue, and our focus now is improving bottom-line results."

The company forecast a loss of $10 million to $25 million for the current fiscal year. Courtney said TiVo would post a loss of $8 million to $10 million for the current quarter.

The company had $106.3 million in cash at the end of its fourth quarter, compared with $88.5 million at the end of its third quarter. Much of the increase came from sales during the holiday quarter.

TiVo's shares, which rose 18 cents to close at $4.34 on Nasdaq, fell 3 cents in trading after the earnings announcement.

The stock got a bump after the company late Wednesday announced that a federal court had ruled in TiVo's favor in the company's patent infringement case against EchoStar Communications Corp., which distributes receivers with built-in recorders.

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