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FBR Still "Low" on TiVo

Financial analyst Friedman Billings Ramsey Thursday reiterated its "underperform" rating for the stock of DVR maker TiVo in the wake of TiVo’s earnings results for the fourth quarter and fiscal year ending January 31, 2006.. Essentially, that means FBR expects TiVo to not do as well as other similar companies, and investors are advised to sell some of their shares until the picture brightens.

Contributing to that rating are an ongoing patent fight with Echostar, competition from cable set-tops with DVR functions, and DirecTV's move to promote its own DVR.

DirecTV, which had been pushing TiVo's DVR's to its customers, is instead encorporating software supplier NDS DVR capabilities into its digital set-top boxes (DirecTV parent News Corp. also owns a majority stake in NDS).

That underperform is also based on financial results that showed subscriber additions were only 183,000 in fourth quarter 2006, down 27% from the same quarter a year before. TiVo actuallly added 356,000 total subs in the quarter, but about half of them (173,000) are from DirecTV, which the company breaks out from the other subs since DirecTV will no longer market the boxes.TiVo reported a net loss of $34.4 million and net loss per share of $0.41 for the year, compared to a net loss of $79.8 million and $0.99 in fiscal 2005.

On the upside are deployment deals with Comcast and what FBR says has been a more aggressive courting of analog cable subs.

FBR has three tiers of stock recommendation:  underperform, market perform, and outperform.

FBR defines underperform this way: "FBR expects the subject company will underperform similar companies within its industry. We recommend that investors reduce their positions until fundamentals or valuations become more compelling."

In order to make its DVR service more competitive with leased DVR offerings from satellite and cable operators, TiVo has announced a new pricing structure that bundles the cost of the TiVo box and the cost of the service into a monthly subscription fee.
Consumers buying directly through an 800 number or the TiVo website can get an 80-hour Series2 TiVo box and receive the TiVo programming service for $19.95 per month, with a one-year commitment, or $224 prepaid for the year.
A two-year commitment to TiVo works out to $18.95 a month or $369 prepaid, while a three-year commitment lowers the monthly cost to $16.95 a month, or $469 prepaid.
The changes to the pricing structure, which launch next week, will not apply to current TiVo customers.
Consumers opting to buy the TiVo box at a retail outlet, where an 80-hour model sells for $69.99 after rebate, will also be able to buy their TiVo service for a one-, two- or three-year commitment upfront as opposed to the $12.95 per month subscription fee. TiVo says it will eliminate its $299 lifetime service option, though it was still being advertised on the company’s website as of Thursday afternoon.