TiVo is a "Junk Company"
When I asked Trip Chowdhry, the Managing Director of Equity Research at Global Equities Research, if he thought that Microsoft was a likely candidate, he responded quickly and assertively.
"No, no, no," he said. "I think Microsoft needs some time to innovate. They are not going to buy junk companies. They are not going to buy yesterday's companies anymore."
The obvious question now is this: is TiVo really a "yesterday" company?
"Yes," Chowdhry replied. "The world is moving too fast. Microsoft is much smarter than before. Microsoft is not going to be a dumping ground for yesterday's technology unless you believe TiVo has very strong patents, which can be enforced across the whole globe. If they do, I'd say yes. But I don't know if they have a very strong patent portfolio. Microsoft will only buy companies that excel and surpass on innovation and have a very strong patent portfolio."
When I pointed out that TiVo won two sizeable settlements in a patent dispute against AT&T (NYSE: T) and Dish Network (NASDAQ: DISH), Chowdhry said that the company has already made the majority of the money on its patents, providing Microsoft with little value. "Most of the money in patents comes from the top three players [that you license your patent to] -- after that, it's nothing," said Chowdhry.
But if not Microsoft, who might be interested in TiVo? "I can tell you for sure it won't be Google," said Chowdhry. "It doesn't fit for Google's strategy."
Digital Video, No Recorder Necessary
While I am not sure that TiVo can be classified as a "junk company," it's far from a strong entity. In a world with Hulu, Netflix (NASDAQ: NFLX) and Amazon Prime (NASDAQ: AMZN), people don't need to DVR their favorite shows. If they can't be there to watch them as they air, they can catch up later online. On-demand viewing provides another option, making it easier to forgo a DVR box.
There are exceptions, of course. The Disney-owned (NYSE: DIS) network, ABC, has had a rough track record with new sitcoms, some of which appeared on Hulu, and others that did not. Then there were comedies like Better With You that came to Hulu and ABC.com and later disappeared before the current season ended. The Comcast-owned (NASDAQ: CMCSA) NBC has had a similar issue with the hit Kathy Bates show Harry's Law. In fact, the first season of Harry's Law didn't even make it to DVD.
In these instances, a recording device is absolutely necessary to ensure that consumers never miss an episode. And since the VCR market is dead, that leaves DVR boxes with plenty of room to dominate.
But since the majority of TV shows are available online (for a limited time, if nothing else), DVRs just aren't as sexy as they used to be. Some people still use them. Those who already purchased a DVR will likely continue to use it for at least the next few years. But unless something changes, don't expect sales to rise anytime soon.
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