Thread: TIVO reports continued losses at an excellerated rate

Yes, I'd like to hear more on that. Who's been pouring capital into them?

Originally Posted by navychop

Yes, I'd like to hear more on that. Who's been pouring capital into them?

I think it may have more to do with creative bookkeeping than a steady flow of mystery cash.

I think it may have more to do with creative bookkeeping than a steady flow of mystery cash.

What type of creative bookkeeping are you suggesting and on what basis do you make that? I think the scheme is more legal but plays on the stupidity of the TIVO trader. With Sarbanes Oxley, few company execs will try cooking the books these days.

More from the analyst's perspective:

TiVo Increases Debt Issue - Analyst Blog
5:49p ET March 10, 2011 (Zacks.com)

TiVo Inc. (TIVO) increased the debt issuance in the form of Convertible Senior Notes from $120.0 million, as announced earlier, to $150.0 million with a semi-annual interest rate of 4.0% per year. The Senior Notes, expected to mature in 2016, will be available in a private placement to qualified institutional investors as per Rule 144A under the Securities Act of 1933.

For its initial buyers, TiVo has approved a 30-day option to purchase up to an additional $22.5 million, up from $18.0 million as announced earlier, of aggregate principal amount of notes to cover over allotment. The offering will close on March 10, 2011.

The issued notes will be convertible into the company’s common stock at the option of the buyers at an initial conversion rate of 89.6359 shares per $1,000 principal amount of notes. As per the initial conversion rate, the conversion price comes in at $11.16.

The stock closed at $8.75 per share when the bourses closed on March 8,2011 and it represented approximately 27.5% conversion premium to its conversion price.

TiVo is entangled in various legal battles against large companies such as Echostar Corp. (SATS), Dish Network Corp. (DISH), Microsoft Corp. (MSFT), AT&T (T), Verizon Communications Inc. (VZ) and most recently, Motorola Mobility Holdings Inc. (MMI).

TiVo is also fighting a lawsuit against Microsoft at the International Trade Commission (ITC), a quasi-judicial forum in Washington, D.C., where companies can ask for a ban on imports of competitors’ products if those products are found violating patent laws.

Funding of intellectual property litigations seems to one of the primary reasons for raising the cash.

In the fourth quarter of 2011, TiVo’s legal expenses were 46.0% of its total operating expenses. TiVo expects its legal expenses to double year over year going forward and for the forthcoming quarter, the company expects the expenses to increase $7.6 million sequentially.

TiVo’s growth also depends on its ability to launch new products on a regular basis, as the company faces stiff competition in the Digital Video Recorder (DVR) market from cable and satellite providers such as Comcast Corp. (CMCSA), DirecTV (DTV) and Dish Network Corp.

TiVo stated that a portion of the funds raised would also be utilized for its R&D activities as well as general corporate purposes. For fiscal 2012, TiVo anticipates that its expenses pertaining to research and development will increase in the range of $25.0 million to $30.0 million from $81.6 million spent in fiscal 2011.

We believe that the debt issuance might pose a significant headwind for the company going forward given its lackluster results and depleting cash reserves.

We have a Neutral recommendation on TiVo over the long term driven by new partnerships with leading companies, new customer wins, product launches and international expansion. However, increasing legal complexities, higher operating expenses, lower subscriber additions and additional debt remain primary headwinds for growth, in our view.

Currently, TiVo has a Zacks #4 Rank, which translates into a Sell rating in the short term.

Navychop:

Yes, I'd like to hear more on that. Who's been pouring capital into them?

As reported on 8K for fiscal year ending Jan31, (****)
Proceeds from issuance of common stock related to exercise of common stock options $30,470,000 (2011) $37,958,000 (2010)
Proceeds from issuance of common stock related to employee stock purchase plan $4,060,000 $4,116,000

I reported this last spring that insiders with stock options were purchasing the stock at low per share price and selling a month later at near double. Then the stock falls due to FUD from the huge institutional sell off and then the insiders may buy it back for a cool tidy legal profit. It's all there in the SEC insider trading reports. The company gets the influx of cash, the insiders get the profits and the public gets hosed but it is their own fault. IS this really legal? I don't know but the transaction is under the nose of the SEC so if they bless this, then it must be. Or, as Jim Cramer often accuses the SEC- they aren't doing their job.

Unfortunately, this stock issuance, plus the cash from Dish as a result of the court order, is not enough to sustain the high expense level of TIVO. Therefore they must raise a substantial volume of cash to cover the legal cost of their business model. Thus the issuance of the convertible notes at only 4% interest. The real incentive to get in on this deal: If the stock does go up the conversion would be a good thing but what will make the stock go up? A new product? Unlikely. A win at the race track of the court system? that is more likely to happen given the track record. I'm sorry to have to admit the logic of that here. How much cash in a Cayman bank would it take to get a Judge to issue a favorable ruling for TIVO, just long enough to get the stock to make a move? Then these investors convert the notes, sell the stock and TIVO stock crashes again. This is a scheme of the Bernie Madoff caliber.

Do the owners care about the company's product? I don't think so. They have a real racket going here with the ability to issue stock to their insiders and set up a rumor that triggers the stock up, they sell, and it falls back down. Anyone who believes TIVO is a DVR these days is a fool. TIVO is a complex stock manipulation scheme. I would not be surprised if we see TIVO on American Greed in a few years.

If TiVo had not entered the legal battles they would be profitable. Now as mentioned above 46% of their expenses are legal bills. This is before MS and Moto suits hit high gear. Even the Dish lawsuit payments are a poor ROI when you consider the risks they took.

They sell their boxes at what seems about cost, but they then get $10 or so bucks a month for essentially guide service which probably costs them 50 cents to a $1 to realistically provide. Not to mention other sources of revenue with ads and DVR data selling.

Even at their current sub levels they could be making a tidy profit and working with companies like Dish/ATT/VZ/DIRECTV to improve their profits instead they got greedy...

Originally Posted by mike123abc

If TiVo had not entered the legal battles they would be profitable.

I don't think the financial data supports that contention. I think if you look back, TiVo never made a profit until after they threw down with Echostar. Such is not to say that they made money because of the litigation, just that it hasn't really turned the tide as you suggest.

TiVo is losing money because they are losing customers at a steady pace.

Who knows what would have happened in a "what if" hindsight. One thing is certain if you look at the numbers. Two groups made huge sums of money at TIVO- The Lawyers and the few insiders who manipulated the stock in a way that made them huge amounts of cash. Who lost? The stock holders who got caught in a buy high sell low corner. Glad I wasn't one of them. Can't really say Dish lost because they did infringe and what they paid was compensation for the IP they used so harshness you are correct, for that quarter when Dish sent the check they turned a profit. The way I see it, Dish paid their punishment for using TIVO technology in that particular case. But it hasn't ( as you said) turned the tide for TIVO as the next quarter they still lost money.