TiVo Unveils New Products

A developer of advanced television services and digital video recorders (DVR) TiVo Inc. (TIVO - Analyst Report), unveiled two new products at the 2011 NCTA Cable Show in Chicago. The products “Premiere Q” and “Preview” will join TiVo's existing advanced television solutions offered to cable operators.

TiVo Premiere Q is the company’s first four-tuner gateway set-top box, which serves as an advanced video gateway. TiVo Premiere Q enables four simultaneous recordings and provides access to streamed broadband content, while supporting up to 3 HD streams over a multimedia over coax (MoCA) or Ethernet home network. Premiere Q installation is less costly and simple as it creates a link between the MoCA and Ethernet networks, which allows easy connections to existing home networks.

TiVo Preview provides the full TiVo user experience for non-DVR households and also functions as a complement to those using a TiVo DVR.

Both the products support operator services such as Video on Demand (VOD), PPV, CallerID on the TV and linear programming, plus access to broadband applications and services.

TiVo plans to offer both new products to its cable operator partners later this year. At the initial stage, cable TV operator, RCN will enjoy the first-mover advantage of providing Premiere Q and Preview to its subscribers, in addition to its current TiVo Premiere offering. Suddenlink also expects to extend its current TiVo offering through these and other TiVo products going forward.

TiVo also announced that it has upgraded its TiVo App for Apple Inc.’s (AAPL - Analyst Report) tablet iPad. The TiVo App for iPad enables users to search, browse, explore and share TV programs or movies, without interrupting what's playing on the television.

The new version automatically adds the operator's VOD into the search and browse features within the App, allowing viewers to quickly find a TV program or movie.

The App also automatically detects and integrates the operator's branding, linear programming and VOD catalog when connected to a TiVo box provided by the operator.

We believe the new set-top boxes and the upgraded iPad App will boost TiVo’s subscriber base. In the first quarter ended April 30, 2011, TiVo-owned subscription gross additions for the quarter were 27,000 compared with 33,000 gross additions in the year-ago quarter.

Recently, TiVo announced the availability of Hulu Plus retail Premier DVRs. TiVo also entered into an agreement with Comcast Corp. (CMCSK - Snapshot Report) to allow its subscribers to access Comcast's robust library of Xfinity TV On Demand content on TiVo Premiere set-top boxes. This partnership is also expected to boost subscriber growth going forward.

Recommendation

We continue to believe that new partnerships with leading companies coupled with new customer wins, product launches and international expansion will drive top-line growth.

The settlement of the patent suite against DISH and EchoStar is also a big positive in our view, since it will boost TiVo’s financial position.

However, the company continues to see patent litigation issues against Microsoft Corp. (MSFT - Analyst Report), AT&T Inc. (T - Analyst Report) and Verizon Communications Inc. (VZ - Analyst Report). Going forward, any negative outcome from these lawsuits will have a negative impact on the shares, in our view.

Moreover, increasing competition from cable and satellite providers could hurt profitability over the long term.

We have a Neutral recommendation on TiVo over the long term (6-12 months). Currently, TiVo has a Zacks #3 Rank, which implies a Hold rating in the short-term (1-3 months).