OT TiVo shares jump on subscriber growth optimism
By Franklin Paul, Reuters / May 26, 2004
NEW YORK (Reuters) - Shares of TiVo Inc. jumped more than 20 percent Wednesday on optimism about the television recording technology company's growth strategy, despite its widening losses and dependence on DirecTV for new subscribers.
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TiVo shares rose to an early high of $9.12 on Nasdaq, recouping most of the losses sustained over the past 6 weeks.
The rise comes after TiVo, whose name has become synonymous with digital video recorders (DVR), late on Tuesday posted a wider fiscal first quarter loss, on better-than-expected revenue, but said subscribers tripled in the period and would do so again in the current quarter.
TiVo chief executive Michael Ramsay reiterated the San Jose, California, company's outlook that it will top 10 million subscribers in three or four years, from nearly 1.6 million at the end of the quarter.
TiVo shares had been under pressure recently amid concerns that it had bet too much of its future on DirecTV, its biggest supplier of new subscribers. While DirecTV and TiVo enjoy a strong relationship today, DirecTV's new corporate parent, Rupert Murdoch's News Corp. Ltd., may bring in a rival DVR provider.
With that in mind, TiVo has accelerated marketing spending in hopes of growing subscribers and drawing attention to its other services, including home media networking and special advertising on its systems.
"TiVo is a compelling story for growth-oriented investors and is well positioned to capitalize on mass market adoption of DVR services and accelerated earnings growth in fiscal year 2006 and beyond," said WR Hambrecht & Co. analyst Ryan Hutchinson, in a note to clients.
However, some analysts suggested the results show that TiVo is precariously dependent on DirecTV. TiVo added 264,000 new subscribers in the quarter, well ahead of analyst expectations, but some 74 percent of them came from DirecTV.
"Given management's second-quarter guidance of only 65,000 to 75,000 stand-alone subscriber additions, we continue to be concerned that the public's desire to own a stand-alone unit may be somewhat muted," said Sanders Morris Harris analyst David Miller.
TiVo shares rose 37 cents to $7.94, in late morning trade, on volume of 25.6 million, sharply up from its daily average of about 2 million.
