TiVo’s Loss Narrows; Its Stock Surges

Digital video recording pioneer TiVo Inc. exceeded Wall Street expectations as its fiscal first-quarter loss shrank, thanks in part to thousands of new subscribers who failed to cash in their $100 rebates.

Alviso, Calif.-based TiVo on Thursday posted a loss of $857,000, or 1 cent a share, for the quarter ended April 30, compared with a loss of $9.1 million, or 11 cents, in the same period in 2004. Revenue rose 36% to $46.9 million.

Analysts surveyed by Thomson First Call had expected TiVo to lose an average of 11 cents a share on revenue of $37 million.

After the earnings were released, TiVo’s shares jumped $1.11, or 16%, to $8.05 in late trading, after rising 22 cents to $6.94 in the market’s regular session.

The loss was smaller than expected partly because some new customers didn’t apply for rebates they were entitled to. By some estimates, as many as 50,000 people didn’t turn in the coupons, saving the company about $5 million.

“How bizarre is that?” said Rob Sanderson, an analyst with American Technology Research, who was among those who expressed confusion over the unexpected windfall during TiVo’s conference call with analysts.

In the past, TiVo has attempted to attract subscribers by offering steep discounts and rebates on its set-top boxes. The company offered a $100 rebate during the last quarter. Although rebates attract reluctant subscribers with cut-rate deals, they also can erode profit.

Mike Ramsay, TiVo’s chairman and chief executive, said the company was not planning to offer rebates in the current quarter and that gains from unredeemed rebates were probably a one-time phenomenon.

For the fiscal year, analysts expect the company to lose 23 cents a share on revenue of $166.96 million. The company has said it hopes to reach profitability by the last quarter of the current fiscal year.

Tivo executives said they slashed some expenses more than they had anticipated, including a $1.2-million reduction of costs associated with making set-top boxes.

But analysts said the company could cut costs further -- particularly advertising and marketing expenses. TiVo spent $6.8 million on sales and marketing in the quarter, up from $5.6 million a year earlier.

“They have the power to become profitable just by shutting off their marketing,” Sanderson said. “The big question is, if they reach profitability without growing, how much is the company going to be worth to investors?”

Members of Tivo’s subscription service use a set-top box to digitally record TV shows. The service, which has more than 3.3 million subscribers, makes it easy to jump forward or back and bypass any content they wish, including commercials, while viewing recorded shows.

TiVo picked up 319,000 subscribers during the quarter, greatly exceeding executives’ previous forecast of 265,000 to 300,000 new customers.