TiVo records write-down, Q2 loss

Demand for high-def equipment slows fiscal period

NEW YORK -- After its first-ever profit in its previous quarter, TiVo Inc. posted a fiscal second-quarter loss Wednesday that widened compared with the year-ago figure in part because of an inventory charge.

The DVR pioneer also continued to lose customers as a reduction in TiVo users among DirecTV subscribers outweighed a 41,000 gross gain in TiVo-owned subscribers.

The company's overall subscriber count stood at 4.2 million as of July 31, down from 4.3 million as of the end of the previous quarter.

However, TiVo CEO Tom Rogers promised that various initiatives will allow the company to expand its users. "Our business is now entering a new phase," he told analysts in a conference call. He later also said that with Liberty Media about to take control of satellite TV giant DirecTV, which has stopped marketing TiVo, there is potential for a "renewed relationship." He didn't provide specifics.

Before the earnings report, TiVo shares closed up 3% on Wednesday at $6.20. But the stock declined in after-hours.

Alviso, Calif.-based TiVo reported a loss of $17.7 million, including an inventory write-down and purchase commitment charge of $11.2 million, compared with a loss of $6.4 million a year ago. The firm had predicted a loss of $5 million-$8 million before knowing of the charge.

Rogers said the company was surprised by how fast retailers have moved from standard definition to high-definition TV products, causing higher-than-anticipated inventory levels of standard definition product parts and making the charge and write-down "prudent."

TiVo's total quarterly revenue rose 5.7% compared with a year ago to $62.7 million. Service and technology revenue, which strips out hardware sales that are usually subsidized, increased 7% to $56.5 million.

Overall, TiVo-owned subscriptions totaled 1.71 million as of July 31, up 136,000 from a year ago.

In an update on TiVo's legal battle with satellite TV firm EchoStar Communications, the company said it is "pleased" that an appeals court has scheduled an oral argument on EchoStar's appeal of a patent infringement judgment for Oct. 4. "This action brings us one step closer to resolution of EchoStar's appeal and implementation of the district court's injunction, which has been stayed pending the appeal," TiVo said.

Rogers told analysts that the latest quarterly results shouldn't be seen as representative of TiVo's expected future momentum based on "significant progress over the past six months ... that we believe will positively impact the growth prospects of TiVo."

He cited the rollout of a TiVo high-definition box as boosting TiVo's strategy to redirect investment from hardware subsidies toward a more advertising-centric approach. He also said that cable giant Comcast Corp. plans to roll out the joint TiVo on Comcast service "shortly."

For the fiscal third quarter, TiVo projected a loss of $14 million-$17 million, including an estimated $3 million in noncash stock-based compensation as part of an agreement with TiVo founder Mike Ramsay who will leave the board, but remain a consultant, effective Saturday. Rogers said Ramsay will join venture firm New Enterprise Associates.

TiVo still expects to break even on an adjusted earnings basis, before interest, depreciation and amortization, for fiscal-year 2008.