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Comcast, TiVo Move Ahead

Comcast, extending its partnership with TiVo, will fund additional development work to make TiVo’s digital video recorder software run on Scientific Atlanta set-top boxes and potentially other platforms.

But TiVo, in reporting a bigger-than-expected second-quarter loss last week, also disclosed that Comcast has not yet begun rolling out TiVo service commercially. The companies will “commence the TiVo rollout process shortly” in Comcast’s New England division, which includes the metro Boston area, Southeast Massachusetts and New Hampshire, TiVo said.

Comcast and TiVo have kept pushing back the date of their initial launch. In June, Comcast was supposed to begin offering the TiVo-branded service in New England by the end of August. Prior to that, the cable operator expected to have TiVo-based DVRs deployed in a majority of its markets by the end of 2006.

Meanwhile, TiVo earlier this month began the retail push for its $299 high-definition DVR, designed “exclusively for cable,” which the company said is now available through major retailers.

But according to TiVo, growing demand for products like the new HD DVR also inhibited sales of the company’s existing Series 2 standard-definition DVRs, leading it to post a net loss of $17.7 million for the quarter ended July 31, compared with a previously projected loss of $5 million to $8 million.

TiVo’s net loss for the second quarter included a combined inventory write-down and inventory purchase commitment charge of $11.2 million. The company reported revenues of $62.7 million for the period, compared with $59.3 million in the second quarter of 2006.

“Increased consumer demand for high-definition products, which accelerated retailers’ movement toward high-definition sales, resulted in a continuation of the tepid trend in standard-definition sales,” TiVo CEO Tom Rogers said in a statement.

For the same reason, the company ended the quarter with a net decline of 19,000 “TiVo-owned” subscribers. Overall, TiVo-owned subscriptions were 1.7 million, up 136,000 compared with a year ago. Subscribers through DirecTV, which no longer offers TiVo boxes, declined by 126,000 to stand at 4.2 million as of July 31.

With the loss of DirecTV as a distributor, TiVo’s deals with Comcast and Cox Communications — which expects to roll out TiVo by the end of the year — are a key part of its growth strategy. In another attempt to win cable’s support, TiVo recently kicked off an initiative to provide front-line support for cable subscribers experiencing issues with CableCard installations.

Comcast and TiVo, which originally struck their agreement in March 2005, first developed the DVR software for Motorola boxes. Through Jan. 31 of this year, Comcast had invested $16.2 million to back the development of TiVo DVR software on Motorola’s set-top box platform, according to TiVo’s 10-K annual report filing.

The operator’s agreement to further develop the DVR maker’s software for SA set-tops and other platforms, according to TiVo, will “increase the distribution opportunities that TiVo will have available.”

Comcast spokeswoman Jenni Moyer said the TiVo-on-SA project is “part of the ongoing work we’re doing with them to be able to eventually put TiVo onto other boxes.” She added that Comcast’s markets are roughly 75% Motorola and 25% SA infrastructure.

Until the Comcast and Cox deals bear fruit, TiVo is counting on brisk sales of its $299 HD DVR to pull it back to breakeven (before interest, depreciation and amortization) for the fiscal year that ends in January 2008.

Rogers, in the earnings announcement, said retailers like Best Buy and Circuit City are “enthusiastic about our new HD product” and are undertaking “more aggressive positioning of TiVo as a centerpiece to an HD media center.”