TiVo Trades Lower Ahead of Expected Earnings Drop

Tivo

When TiVo reports after the bell today analysts expect it to post its ninth consecutive quarterly deficit as its subscriber numbers continue to shrink.

Wall Street's expecting a quarterly loss of 28 cents per share on revenues of $41 million — yes $41 million.

Today TiVo shares are trading lower as options traders are jumping on the stock. And this morning Caris & Company downgraded the stock from "Buy" to "Above Average."

The question isn't whether TiVo posts a loss — that's inevitable — but whether it beats expectations. In the most recent quarter TiVo fell short of analyst forecasts, though the three prior quarters it surpassed them.

TiVo's tumultuous one-year stock charttells the story of a company facing a range of challenges.

For one thing, there are thee challenges to its subscriber base: users are switching to rival DVR services, many of which are embedded in their cable or satellite TV providers. And the growth of on-demand viewing, both through cable carriers, and the likes of Netflix and Hulu, makes a DVR service less relevant and necessary.

And then there are Tivo's numerous legal challenges with Dish, EchoStar, and most recently Motorola Mobility. We can expect these lawsuits and their potential outcomes to be a hot topic on today's earnings call. The latest suit — Motorola mobility is suing TiVo, alleging its DVR boxes use technology patented by Motorola .

Back in 2004 TiVo sued Dish for violating a key patent — the case was heard most recently in November and now we're awaiting a ruling. If TiVo wins Dish could pay hundreds of millions of dollars in damages, which would certainly be a good thing. But on the flip side, a judge decided that a patent infringement case EchoStar brought against TiVo will go to trial. The action on these lawsuits will continue to have a major impact on TiVo's stock.

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