Post by dkennedy on Mar 14, 2005 6:23:44 GMT -5
Losses mounting at TiVo
DVR firm says it's about to reduce rebates, advertising
Friday, March 11, 2005
Benny Evangelista, Chronicle Staff Writer
TiVo Inc. plunged deeper into the red during the fourth quarter because of an aggressive strategy to lure new subscribers, but executives said Thursday they believe the firm is on track to finally turn a profit by the end of this year.
As part of its plan to reverse its losses, the South Bay digital video recorder maker said it will cut back on the rebates and advertising that helped push its subscriber base over the 3 million mark, a strategy that had analysts questioning its future in a market that is becoming crowded with competitors.
"TiVo's step today probably means they're going to be in business for a while, because they won't run out of cash,'' said Gene Munster, a senior research analyst for Piper Jaffray & Co. "They're going to manage to stay in business, but it's going to be an orphaned business basically, because they don't have a growth strategy.''
For the fourth quarter that ended Jan. 31, TiVo posted a net loss of $33. 7 million (42 cents per share) on revenue of $59.4 million. The results compared with the $12.4 million loss (18 cents) on revenue of $42.6 million the Alviso company posted for the previous fourth quarter.
For fiscal year 2005, TiVo lost $79.8 million (99 cents per share), more than double the net loss of $32 million (48 cents) for fiscal year 2004. Revenues for 2005 were $172 million, a gain from the $141 million posted in 2004.
TiVo, one of the pioneers of digital video recording, has not turned a profit since it was founded in 1997. It is facing increasing competition from cable and satellite TV providers and computer companies offering competing DVR products.
TiVo is also undergoing a management shakeup. In January, co-founder Mike Ramsay announced he would step down from his post as chief executive officer but remain as board chairman. Soon afterward, President Marty Yudkovitz resigned, saying he wanted to spend more time with his family.
During a conference call with analysts, Ramsay said the search for a new CEO is in its early stages.
TiVo's quarterly loss came mainly from its plan to aggressively pursue new subscribers with an advertising push and by offering a $100 mail-in rebate on its entry-level model.
The strategy succeeded in pulling in 698,000 new subscribers during the fourth quarter, more than twice the number of customers added during the previous fourth quarter. Of those new subscribers, 447,000 came from TiVo service sold through satellite TV provider DirecTV, which has plans to market its own DVR service later this year.
"The resulting stream of recurring revenues sets us up to dramatically improve our profitability this year,'' said Chief Financial Officer David Courtney. The quarterly loss was better than expected, he said.
Courtney said the company expects to add 265,000 to 300,000 subscribers during the first quarter of this year. However, he said about 65,000 to 75,000 of those subscribers are expected to buy the stand-alone TiVo box and service and the rest will come through DirecTV.
But TiVo also plans to cut back on the $101 million it spent during the year to attract those new customers, including $38.4 million during the fourth quarter.
"This year, we're going to shift our focus toward profitability,'' Ramsay said.
April Horace, an analyst with Janco Partners Inc., said the company's plan to turn a profit by the end of the year left her with more questions than answers.
"Their strategy remains unclear to me, because I can't get the math to work,'' Horace said.
E-mail Benny Evangelista at bevangelista@sfchronicle.com.
DVR firm says it's about to reduce rebates, advertising
Friday, March 11, 2005
Benny Evangelista, Chronicle Staff Writer
TiVo Inc. plunged deeper into the red during the fourth quarter because of an aggressive strategy to lure new subscribers, but executives said Thursday they believe the firm is on track to finally turn a profit by the end of this year.
As part of its plan to reverse its losses, the South Bay digital video recorder maker said it will cut back on the rebates and advertising that helped push its subscriber base over the 3 million mark, a strategy that had analysts questioning its future in a market that is becoming crowded with competitors.
"TiVo's step today probably means they're going to be in business for a while, because they won't run out of cash,'' said Gene Munster, a senior research analyst for Piper Jaffray & Co. "They're going to manage to stay in business, but it's going to be an orphaned business basically, because they don't have a growth strategy.''
For the fourth quarter that ended Jan. 31, TiVo posted a net loss of $33. 7 million (42 cents per share) on revenue of $59.4 million. The results compared with the $12.4 million loss (18 cents) on revenue of $42.6 million the Alviso company posted for the previous fourth quarter.
For fiscal year 2005, TiVo lost $79.8 million (99 cents per share), more than double the net loss of $32 million (48 cents) for fiscal year 2004. Revenues for 2005 were $172 million, a gain from the $141 million posted in 2004.
TiVo, one of the pioneers of digital video recording, has not turned a profit since it was founded in 1997. It is facing increasing competition from cable and satellite TV providers and computer companies offering competing DVR products.
TiVo is also undergoing a management shakeup. In January, co-founder Mike Ramsay announced he would step down from his post as chief executive officer but remain as board chairman. Soon afterward, President Marty Yudkovitz resigned, saying he wanted to spend more time with his family.
During a conference call with analysts, Ramsay said the search for a new CEO is in its early stages.
TiVo's quarterly loss came mainly from its plan to aggressively pursue new subscribers with an advertising push and by offering a $100 mail-in rebate on its entry-level model.
The strategy succeeded in pulling in 698,000 new subscribers during the fourth quarter, more than twice the number of customers added during the previous fourth quarter. Of those new subscribers, 447,000 came from TiVo service sold through satellite TV provider DirecTV, which has plans to market its own DVR service later this year.
"The resulting stream of recurring revenues sets us up to dramatically improve our profitability this year,'' said Chief Financial Officer David Courtney. The quarterly loss was better than expected, he said.
Courtney said the company expects to add 265,000 to 300,000 subscribers during the first quarter of this year. However, he said about 65,000 to 75,000 of those subscribers are expected to buy the stand-alone TiVo box and service and the rest will come through DirecTV.
But TiVo also plans to cut back on the $101 million it spent during the year to attract those new customers, including $38.4 million during the fourth quarter.
"This year, we're going to shift our focus toward profitability,'' Ramsay said.
April Horace, an analyst with Janco Partners Inc., said the company's plan to turn a profit by the end of the year left her with more questions than answers.
"Their strategy remains unclear to me, because I can't get the math to work,'' Horace said.
E-mail Benny Evangelista at bevangelista@sfchronicle.com.