Briefing on TIVO:
TiVo (TIVO) 11.45 +2.95: Quite a two-day streak TIVO shares have put together. Yesterday's 72% run is followed by today's 34% advance, and TiVo's market cap has more than doubled in two sessions. It should be noted that there was a large short position out on TIVO shares, but this is more than just covering. Three events over the last two days have conspired to kill the shorts in TIVO and invite new buyers. Yesterday the company announced a patent award for their Multimedia Timewarping System. As cool as that sounds, and as nifty as these gizmos are, personal video recorders (PVRs) have been around for awhile. Until yesterday, the Street tended to view TiVo as a one-trick pony that will eventually be stampeded by the bigger horses if the consumer market embraces the PVR. History has been repeated so many times in the case of the first mover getting trampled, TiVo looked like the next victim. Will this patent make the difference? The Street believes this patent means a steady stream of licensing fees, and it very well might, but betting on patents is tricky in technology, as there is a precedent of legally skirting patents to make and sell devices that accomplish the same function. Secondly, the company beat Q1 Street estimates after the bell yesterday by posting a loss of $1.20 per share. Then came the upgrades. Two firms upgraded the shares today, citing the patents and strong subscriber growth. Here's the rub: TiVo burned through $50 mln in cash during the quarter, leaving it with about $120 mln in cash, cash equivalents and restricted cash (contingent on its agreement with AOL). The company is in the process of paring back costs, and a 25% workforce reduction was recently announced. However, it will not be profitable for the next two years, and will need to raise more capital. With a current ratio under 1.5x (under 1.0x excluding the restricted cash), TiVo's liquidity position is far from sound. Of course, this is a speculative play for high risk tolerant traders, so things like P/Es, current ratios and profit margins are of little concern. Now there's a timewarp. -- Matt Gould, Briefing.com |
