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Tivo Drops on Fourth-Quarter Outlook

Investors sent shares in TiVo plunging after the maker of digital video recorders gave a lukewarm fourth-quarter forecast.

In recent trading, the stock was off 57 cents, or 9% to $5.72. It lost about half of that in the off-hours session, before continuing its fall once the Nasdaq opened. In the past year, the stock has ranged from $5.05 to $9.49.

Reporting after the closing bell Wednesday, TiVo said its loss narrowed from a year ago as net revenue rose sharply, but the company's fourth-quarter financial guidance was lower than Wall Street expected.

While investors reacted decisively, analysts gave a mixed reaction to the results, with Citigroup reiterating a "Buy" rating, while Oppenheimer cut the stock to "Sell."

Oppenheimer analyst Alan Bezoza based his move on "weaker-than-expected subscriber metrics and fourth-quarter outlook." He said net subscriber additions and average revenue per customer missed expectations.

Bezoza said the narrower-than-expected per-share loss was caused by fewer rebates and lower marketing costs. Those expenses will return in the fourth quarter, as TiVo increases marketing a program that gives away or deeply discounts set-top boxes when customers subscribe to its service, he said.

"We continue to believe that TiVo lacks the ability to grow profitably given its current model," Bezoza said.

But Citigroup's Tony Wible applauded TiVo's strategy of giving away its hardware, saying it will lead to increases in subscription revenue, despite having a short-term negative effect on revenue.

The analyst also expects TiVo's planned cooperation with Comcast Corp., the nation's largest cable operator, to help boost its subscriber base. Comcast is expected to offer TiVo service as a premium feature starting next year.

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