(TIVO) TiVo Misses Earnings Estimates – Signs Deals

TiVo Inc. (TIVO) reported a net loss of 6 cents a share for the third quarter of fiscal 2010, a penny below the Zacks Consensus Estimate of a loss of 5 cents, and fell substantially from the prior-year quarter. The company had reported EPS of 98 cents in the third quarter of 2009, boosted by $87.8 million in litigation proceeds related to EchoStar Corp. (SATS).
 
TiVo reported a net loss of $6.7 million for the reported quarter, better than its previously guided range of a net loss of between $8 million and $10 million. Excluding the EchoStar litigation proceeds, TiVo would have posted a net loss of $0.9 million last year.
 
Despite an improving spending environment, TiVo provided lower-than-expected guidance. Management expects a higher net loss in the range of $13 million to $15 million in the fourth quarter of 2010 due to higher R&D and litigation expenses.
 
Net revenue for the reported quarter declined 11.8% year over year to $56.9 million compared to $65.5 million reported in the prior-year quarter.  Services (the company’s largest segment) and Hardware revenues witnessed year-over-year declines of 20.9% and 23.2%, respectively, partially offset by a rise in Technology revenue, which was up 134% in the quarter.
 
Service and Technology revenue together declined 8.8% to $47.1 million but was in line with the company’s guidance of $46 – $48 million. For the fourth quarter of 2010, TiVo expects to generate Service and Technology revenue of $43 million to $45 million. 

TiVo is not immune to the current challenging economic environment and is facing erosion of its subscriber base. The economic downturn has made operations more difficult. Gross margin dropped to 46.6% from 53.7%. Results for the quarter were impacted by a one time reduction in service revenues associated with a subscription over-reporting error for the past 18 months by DIRECTV (DTV).
 
TiVo-owned subscription gross additions for the quarter were 34,000, down 25% from 44,000 gross additions in the year-ago quarter. Subscriber acquisition costs fell 48%. The monthly churn or cancellation rate was 1.7%, up from the prior-year quarter churn of 1.4%. At the end of the quarter, there were about 1.5 million TiVo-owned subscribers and 2.7 million total subscribers.
 
TiVo reported its ninth consecutive quarter of positive adjusted EBITDA of $1.4 million and surpassed the management’s guidance of ($2) million to break-even. However, this was down 98.5% from the year-ago quarter due to lower interest income, fall in Service and Hardware revenue and rise in legal expenses. Adjusted EBITDA is expected to be in the range of ($5) million to ($7) million for the fourth quarter of 2010.


The satellite television provider TiVo is a pioneer in digital video recording (DVR) technology. TiVo has made great strides in differentiating its DVRs from less expensive generics, which helped the company bolster its sagging market share and increase revenue. TiVo recently signed a number of content deals with Blockbuster (BBI), Netflix Inc. (NFLX), Amazon.com (AMZN) and Disney (DIS).
 
Moreover, to expand internationally, TiVo announced a strategic partnership with Virgin Media Inc. (VMEDW). Under the partnership, TiVo will develop interactive programs to develop middleware and interface Virgin Media's next-generation high-definition set-top boxes in the UK. TiVo launched products this month in New Zealand, which will further boost its international presence.
 
TiVo plans for domestic roll-outs of DIRECTV and RCN Corp. (RCNI) next year. This is in addition to an expected acceleration in Comcast’s (CMCSA) deployment of its services next year and Best Buy’s (BBY) 2010 marketing initiatives.
 
TiVo also struck a deal with Google (GOOG) to integrate its television viewing data into Google's measurement for ads sold through the Google TV Ads platform.
 
TiVo has a market cap of $1.2 billion with no debt and $245 million in cash. We believe that its recent deals will be beneficial for the company in the longer term.
 
TiVo’s long-standing patent dispute with Dish Network Corp (DISH) remains. Additionally, TiVo has filed a lawsuit against large telecom providers such as AT&T (T) and Verizon Wireless (VZ) over its DVR technology. These disputes are a hurdle to the company’s growth.
 
TiVo also faces increasing competition from cable and satellite providers, who have begun offering DVR services with TiVo’s digital cable in one set-top box at no upfront costs and at comparable monthly subscription rates.

There looks to be a lot of November Expiration related "pinning" going on as we head into Friday's close.

Many big equities are moving right towards strike price pin levels, including Apple (AAPL) at 200, Google (GOOG) at 570, Research in Motion (RIMM) at 60, Disney (DIS) at 30, AIG (AIG) at 35, Fifth Third Bank (FITB) at 10, Netflix (NFLX) at 60, Amazon (AMZN) at 130, Costco (COST) at 60, Dish (DISH) at 20, Monsanto (MON) at 80, H-P (HPQ) at 50, Coca Cola (KO) at 57.5, among others.

• JPMorgan snaps up Cazenove. JPMorgan (JPM) agreed to acquire the half of British stockbroker Cazenove it doesn't own for £1B ($1.7B) in a widely-expected deal. JP Morgan will combine J.P. Morgan Cazenove's cash equities and research divisions with its existing operations covering Europe, the Middle East and Africa. JPMorgan has weathered the financial crisis better than most rivals, and is now taking advantage of their problems and grabbing opportunities.
• OECD doubles growth forecast. The 30 counties that make up the Organization for Economic Cooperation should grow 1.9% next year - twice what the group forecast in June - and by 2.5% in 2011, according to its latest Economic Outlook. China will lead the way both years, with 10.2% growth seen in 2010. Heavy debt levels mean the U.S. and euro regions will lag, gaining 2.5% and 0.9% respectively. The OECD gave 2011 growth forecasts for the first time, with the U.S. growing 2.8%, the euro area 1.7%, Japan 2% and China 9.3%.
• Obama warns of double dip. The U.S. is flirting with a double-dip recession if it doesn't act to contain rising U.S. deficits, President Barack Obama warned Wednesday in an interview with Fox TV. The government is challenged in trying to boost the economy and spur job creation while setting a path toward long-term deficit reduction. Obama said the administration is considering tax measures to spur companies to hire.
• Blackstone's Pinnacle defrosts Birds Eye. Blackstone Group's (BX) Pinnacle Brands will reportedly pay $1.3B in cash to buy privately-held Birds Eye Foods, the largest frozen-vegetable company in the U.S. and owner of brands such as Duncan Hines and Swanson, another sign private-equity deals may be coming back to life. Birds Eye is majority-owned by the private-equity firm Vestar Capital Partners.
• Vivendi may bow out of NBCU. Vivendi's (VIVDY.PK) CFO says the company has no plans to be part of the future JV that Comcast and Electric (GE) are discussing. Selling his company's 20% percent stake in NBCU would give Vivendi "additional financial headroom" after it gained control of Brazil's telecoms operator GVT last week, he said, adding "we are not there yet."
• Did Goldman mislead over AIG risk? Goldman Sachs (GS) could have been on the line for billions of dollars in losses when AIG collapsed if the U.S. government hadn't come to the insurance company's rescue, a new government report suggests, confirming everyone's suspicions. Among other things, the report raises doubts about Goldman's previous claims that it was hedged against potential AIG losses, and suggests that Goldman would have found it difficult to liquidate its trading positions with AIG, even at discounts. A Goldman spokesman called the risks a "moot point."
• Fortinet on fire. In a promising sign for venture-capital-backed IPOs, Fortinet (FTNT) soared after the network security provider launched on Nasdaq Wednesday - gaining 33% - the fourth best showing of any U.S. IPO this year, although one analyst said this was in part because shares were priced at a discount to its peers. Venture-capital backed IPOs have mostly lagged those by private-equity owned companies in 2009.
• Toll accuses FHA of "train wreck." Homebuilder Toll Brothers (TOL) accused the FHA of creating a potential "train wreck" because it insures home purchases made with down payments as small as 3.5%. FHA loans accounted for about 8% of the mortgages Toll closed last quarter, while the agency guarantees 20% of all single-family loans. While the FHA's insurance reserve ratio has fallen to an all-time low, a senior government official denied that the FHA is the next subprime mortgage crisis.
• Wells in auction-rate slapdown. One year after the auction-rate securities market collapsed, Wells Fargo (WFC) agreed to repay up to $1.4B to brokerage clients whose assets were frozen when the market collapsed. Wells will also pay a $1.9M fine and reimburse investors who sold their holdings at a discount. Wells said the repurchase will have an estimated impact of $150M in Q4, and that it expects to recover this over time through redemptions of the securities. So far, banks have been forced to buy back $61B in ARS since February 2008.
• AMD cleans up debt. In a move to clean up its debt-riddled balance sheet, AMD (AMD) said it's buying back up to $1B of convertible notes and $390M in senior notes. To help pay for the converts, the company plans to issue $500M of senior notes due 2017 in a private offering. AMD's shares rose 8.9%.
• U.S. wants out of GM. The U.S. government wants to fast-track its way out of the nearly 61% stake it holds in GM as part of a policy to restructure the automaker in bankruptcy. The administration wants to exit through an IPO as soon as Q4 2010, providing the automaker is meeting its recovery targets and financial markets are receptive. GM is revaluing its balance sheet to provide "fresh start" accounting of its assets and liabilities since emerging from bankruptcy in July. Last week, GM said it may repay government loans sooner than expected. Separately, a senior official in the administration's auto task force said the group was caught off guard when GM decided to scrap a planned sale of its Opel unit backed by Germany, but affirmed the company's independence to make such decisions.
• No more "too big to fail". Still smarting over the tens of billions the government spent to save some of America's biggest financial firms year, the House Financial Services Committee approved a proposal that would empower regulators to break up large financial firms that threaten economic stability. The measure was an amendment to a broader bill that's expected to face a committee vote as soon as Friday. Regulators would evaluate factors such as a firm's size, exposure, leverage and relationships, and would have the power to call for tougher oversight, halt or change a firm's activities, limit mergers and acquisitions, or even dismantle them.
• Fed may focus on back-door tightening. St. Louis Federal Reserve Bank President James Bullard said Wednesday that, "The main challenge for monetary policy going forward will be how to adjust the asset purchase program without generating inflation while interest rates are near zero" and that the inflation outlook hinges on what the Fed does with this program. The Fed has bought $300B in longer-term U.S. government debt and plans to purchase about $1.43 trillion in mortgage-related securities by the end of March. Bullard suggested that the Fed would not wait as long as it has after previous recessions to raise interest rates, given criticism that a delay fueled the housing bubble.
• Santa may come late for Amazon rivals. Sony (SNE) and Barnes & Noble (BKS), both angling for a piece of the growing e-book reader market that Amazon.com (AMZN) cornered with Kindle, are falling behind in the race to get rival products out in time for Christmas delivery. Sony said Wednesday its new Daily Edition Reader - promised to be ready for the holidays - will only ship Dec. 18 through Jan. 8, adding that the actual delivery date can’t be guaranteed. Barnes & Noble said the same last week. Late orders could leave the field wide open to Amazon. Separately, Sony pushed back the elusive 5% operating profit margin - originally slated for 2008 - to 2013.
• New head of DirecTV signals sale? The appointment of a PepsiCo veteran with no experience in pay-TV could signal that parent Liberty Media (LINTA) is prepping DirecTV Group (DTV) for a sale, sources say. Verizon (VZ) and AT&T (T) have already expressed interest in the unit over the past year, but the talks ground to a halt due to regulatory concerns and are not currently active. Liberty Media shareholders are set to vote today to approve a plan to split DirecTV from Liberty Entertainment (LMDIA), a move some believe could pave the way for a telephone company to put in a bid for DirecTV, perhaps prompting a similar bid for smaller rival Dish Network Corp. (DISH).
• Paulson gold bug. After clocking $20B by betting against the housing and financial markets for his hedge fund, John Paulson is launching a new fund that will buy shares of gold-related investments and gold derivatives. Paulson reportedly has more than 10% of his some $30B under management in gold-related investments, including billions of dollars worth of gold ETFs and futures. Although Paulson's gotten a boost from the recent surge in gold prices, some say the rally raises questions about the timing of the launch.
• GE sees slow growth for key unit. The economic downturn in the U.S. and European economies will likely bog down revenue growth for General Electric's (GE) technology infrastructure segment, a senior company official says. The division accounts for 39% of GE's profit. Growth in China will likely help, but won't offset the downside the company will feel in developed markets, he said.
• U.S. data damps inflation fears. Consumer prices rose moderately in October, suggesting the Fed will refrain from raising rates in the near future. CPI rose 0.3% from 0.2% in September; economists were expecting a 0.2% climb. Home construction data, meanwhile, suggest that the economic recovery is still hooked on government support after October home construction fell 10.6% from the prior month to 529,000, the fewest starts since April's record low.
• Ambac back from brink. Ambac (ABK), once the No. 2 bond insurer in the U.S., said its main bond-insurance unit now has a capital surplus - quelling fears of a liquidity crunch and possible bankruptcy in 2010. The company, which has been hobbled by losses from derivative-based guarantees it sold on mortgage-related securities during the housing boom, said statutory capital for Ambac Assurance Corp was $856M, well above the $2M minimum required. Ambac said in an 8-K filing that it benefited from $311M reinsurance payments and its ability to cancel four asset-backed securities derivative contracts that had been worth more than $5B for cash payments of $520M. Shares jumped 44% to close at $1.01.

Earnings: Before Open

• Patterson Companies (PDCO): FQ2 EPS of $0.41 in-line. Revenue of $815M (+7.3%) vs. $788M. (PR)
• Sears (SHLD): Q3 EPS of -$0.81 beats by $0.28. Revenue of $10.19B vs. $9.92B. Gross margin 27.2% vs. 26.8% last year. SSS -4.6%. Total debt $3.8B vs. $4.5B last year. (PR)
• Suntech Power (STP): Q3 EPS of $0.16 beats by $0.08. Revenue of $473M (-20.4%) vs. $427M. Shares +3.5% premarket. (PR)
• Trina Solar (TSL): Q3 EPS of $1.29 beats by $0.53. Revenue of $250M (-14.1%) vs. $216M. (PR)
• Williams-Sonoma (WSM): Q3 EPS of $0.16 beats by $0.11. Revenue of $729M (-3.1%) vs. $686M. (PR)

Earnings: Wed. After Close

• Gymboree (GYMB): Q3 EPS of $1.15 beats by $0.02. Revenue of $266M (+2%) vs. $269M. Sees Q4 EPS of $0.95-1.03 vs. $1.13. Shares -2.4% AH. (PR)
• Hot Topic (HOTT): Q3 EPS of $0.15 beats by $0.02. Revenue of $189.6M (-4%) vs. $190.5M. Sees Q4 EPS of $0.23-0.26 vs. $0.30. Shares -4.8% AH. (PR)
• Jack in the Box (JACK): FQ4 EPS of $0.70 beats by $0.15. Revenue of $540M (-7%) vs. $549M. Sees fiscal 2010 EPS of $1.90-2.10 vs. $2.32. Expects Q1 same-store sales down 10% and fiscal 2010 SSS down 3-7%. Shares -5.9% AH. (PR)
• Limited Brands (LTD): Q3 EPS of $0.02 beats by $0.03. Revenue of $1.8B (-4%) in-line. Same-store sales down 2%; raises full-year EPS guidance to $0.93-1.08 from $0.75-0.90, vs. $0.97. Shares +3.2% AH. (PR)
• NetApp (NTAP): FQ2 EPS of $0.37 beats by $0.07. Revenue of $910M (+0%) vs. $881M. Sees Q3 EPS of $0.36-0.37 vs. $0.36, on revenue of $935M-955M vs. $921M. Shares +4.3% AH. (PR)
• Netease.com (NTES): Q3 EPS of $0.44 misses by $0.05. Revenue of $129M (+9%) vs. $139M. Shares -8% AH. (PR)
• PetSmart (PETM): Q3 EPS of $0.31 beats by $0.03. Revenue of $1.3B (+4%) in-line. Same-store sales up 0.3%. Shares -1.2% AH. (PR)
• Phillips-Van Heusen (PVH): Q3 EPS of $1.08 beats by $0.19. Revenue of $697M (flat) vs. $670M. Sees Q4 EPS of $0.38-0.42 vs. $0.49, on revenue of $585M-595M vs. $582M. Raises full-year guidance to $2.59-2.63 from $2.30-2.40, vs. $2.50. (PR)

Today's Markets

Asia markets were sharply lower Thursday, with the exception of Shanghai. In Europe, stocks are under pressure at midday, as are U.S. futures in the premarket.

Stocks discussed on the lightning round session of Jim Cramer's Mad Money TV Program, Wednesday November 18.

Bullish Calls:

Dish Network (DISH), DirecTV (DTV): "Both of these companies have momentum, they have subscribers, they have love. They are terrific and they are not expensive. Dish and DirecTV. Both of them rock."

Dish Network Corp. (NASDAQ: DISH) is searching for lower levels according to technical charts, as the 200 days MA as touched the 20 days short-term MA.