Comcast, TiVo Record a Deal

Shares of TiVo Inc. rocketed 75% on Tuesday after Comcast Corp. agreed to offer the struggling digital video recorder maker’s service -- TiVo’s first deal with a major cable provider.

TiVo’s service, which allows viewers to pause live television and record an entire season of shows, will be offered to Comcast’s 21.5 million subscribers after mid-2006, giving a big boost to the company whose product has brought it more fame than fortune.

Alviso, Calif.-based TiVo has not turned a profit since it went public in 1999, but executives have vowed to lift the company out of the red by the end of the year. They are looking to more deals like the one with Comcast -- as well as a continuing agreement with satellite giant DirecTV Group Inc. -- to bolster its subscriber base.

“We hope it will open other cable providers to a dialogue with us,” said TiVo board member Tom Rogers, who helped negotiate the deal with Comcast.

The two companies had been close to an agreement last fall, but the deal fell apart and each side blamed the other. Neither company would comment Tuesday on how the talks were rekindled, but analysts said the union made sense: TiVo wins wider distribution and Comcast gains a recognized brand name as it tries to sell premium services.

Comcast, the nation’s largest cable company, and other cable providers have rolled out their own digital video recorders in recent years, clipping TiVo’s growth. Many customers, however, have complained that the cable companies’ boxes are inferior to TiVo, which former Federal Communications Commission Chairman Michael K. Powell once called “God’s machine.”

Under the deal with Philadelphia-based Comcast, TiVo will make its software work on Comcast’s recorders and share in the subscription revenue.

TiVo shares rose $2.87 to $6.70 on Nasdaq. They once traded as high as $71.50.

Not everyone on Wall Street cheered. Analyst Alan Bezoza of Friedman Billings Ramsey Group Inc. downgraded TiVo shares, saying the company’s weak financial position forced it to accept an unfavorable deal. Analysts speculated that TiVo would receive as little as 80 cents a month from each Comcast subscriber who signs up; TiVo charges $12.95 a month for the service.

“We feel that TiVo held its nose and signed a tough deal with Comcast,” Bezoza said in a report to clients.

Analyst Tony Wible of Smith Barney was more upbeat.

“It does provide better prospects for additional cable operators to give them a look,” Wible said. “Now they have a better chance for sticking around and growing their business.”

Although TiVo is a household name, the company has struggled. TiVo lost $79.8 million in fiscal 2004, which ended Jan. 31, more than double what it lost the previous year. In January, Chief Executive Mike Ramsay said he would step down when a successor was found. And the president of the company, Marty Yudkovitz, resigned last month.

Adding to the uncertainty, DirecTV said in January that it would offer its own TiVo-like service. DirecTV accounts for 62% of TiVo’s 3 million subscribers. The contract between TiVo and DirecTV expires in 2007.

As shaky as TiVo is, Comcast’s in-house digital video recording service needed a boost. It sells the service for $9.95 a month, but only 324,000 subscribers -- about 1.5% of Comcast’s total -- have signed up, a company spokeswoman said.

Comcast executives said the in-house brand would continue to be offered to its subscribers. They would not say whether the TiVo service would cost more.