To TiVo or not to TiVo

Despite a big legal victory and new deal with cable company Cox, some analysts think TiVo's stock is due for a pause after a big rally.
NEW YORK -- Wall Street just can't figure out TiVo. Sure, most consumers love the digital video recorder company, which has become the equivalent of Kleenex or Google for the DVR industry.
But over the past few years, the stock chart has looked like one of those sine/cosine graphs from your high school trigonometry class: plenty of peaks and valleys.
Bulls argue that TiVo's loyal subscribers and innovative technology and patents will eventually lead the company, which continues to lose money, to financial riches. Bears counter that there is too much competition from cable companies, which offer their own DVRs to customers at a reasonable price.
For now, TiVo is once again on the upswing. Shares of TiVo (Charts) have surged 53 percent in 2006, with much of the move coming this month. The stock has zoomed more than 20 percent in the past week and a half on news of a favorable court ruling and a licensing agreement with cable company Cox Communications.
Earlier in August, a federal judge issued an injunction against satellite TV company EchoStar (Charts), ruling that EchoStar must stop selling many of its own digital video recorders since a jury found in April that EchoStar had infringed on one of TiVo's patents. An appeals court later blocked the injunction temporarily, however.
Still, some think the TiVo-EchoStar legal battle opens the door for TiVo to make more deals with cable companies that would rather not fight TiVo in court. To that end, Cox, the nation's fourth-largest cable company, announced last week that it would allow its DVR customers to download TiVo software to their cable boxes beginning next year.
In addition, DirecTV (Charts) announced in April that it was extending its deal to support customers that currently have TiVo through DirecTV for another three years. Although the satellite company is not marketing TiVo to new subscribers because it has developed its own DVR with sister company NDS Group, this deal was seen as significant because as part of the agreement, DirecTV and TiVo also agreed that they would not sue each other over patents.
"My sense is that TiVo has been negotiating with cable companies all along but the recent verdict helps. The Cox deal was probably sped up a little bit by the injunction against EchoStar," said Alan Gould, an analyst with Natexis Bleichroeder. "I would assume that TiVo is negotiating with Time Warner, Charter, Cablevision and other big cable companies." (Time Warner (Charts) also owns CNNMoney.com.)
In theory, this should be great news for TiVo. And Gould has an $11 target on TiVo's stock, which is about 38 percent higher than the price at which the stock currently trades.
How big is the cable opportunity?
But how much will TiVo really gain from striking licensing deals with cable companies? This remains to be seen, and that has some analysts turning skeptical, especially following the recent run in TiVo's stock.
After all, TiVo already has a deal with Comcast (Charts), the nation's largest cable company, that is similar to the one with Cox. Comcast will roll out TiVo's software to its customers later this year, but analysts aren't certain how much TiVo will receive from Comcast.
"I would like to get more details about how the rollouts at cable companies will occur since that could have a big impact on the economics for TiVo," said Mark Harding, an analyst with Maxim Group.
Harding said that it would be more beneficial to TiVo if all Comcast and Cox DVR customers automatically received upgraded services with TiVo since that would lead to more monthly subscription revenue for the cable companies and TiVo to divvy up. Instead, it appears that subscribers will have the option to download the software, Harding said.
As such, one analyst thinks that deals with cable firms won't wind up being that much of a revenue growth opportunity for TiVo.
"Even if all major U.S. cable operators incorporated TiVo's software as a subscriber option for their DVRs, and using aggressive assumptions, this would not be more than $35-$40 million per year by 2009," wrote Brian Coyne, an analyst with Friedman, Billings, Ramsey, in a report last week following the news of the Cox deal.
Coyne pointed out that this amounts to just 8 percent of the total revenue he expects TiVo to generate next year.
Analysts are hoping for more details about the Cox and Comcast deals when TiVo reports its latest financial results on Wednesday. Wall Street expects the company to report a quarterly loss of 14 cents per share on sales of $51 million.
It is the escalating losses that have some concerned. TiVo actually broke even in last year's second quarter. For the full year, analysts expect TiVo to report a loss of 67 cents a share, compared to an annual loss of 41 cents a share in 2005
"I would be recommending caution on TiVo's stock. With so much uncertainty out there I'd wait on the sidelines," Harding said..
And Natexis's Gould, who is bullish on TiVo's stock, concedes that TiVo probably won't report a full year of positive cash flow until 2008 and that it won't be profitable until after that.

Report: Ford eyes credit unit sale

Embattled No. 2 automaker is considering sale of "significant stake" in Ford Credit as it tries to draft new turnaround plans.
NEW YORK -- Ford Motor Co. is weighing selling a "significant stake" in its Ford Credit unit as the troubled automaker tries to come up with a new reorganization plan, according to a published report.
The Detroit News reported Monday that a sale of a stake in Ford Credit is now under consideration, although it said such a sale isn't Ford's primary focus as it concentrates on operational issues in the wake of losses and declining market share.
Competitor General Motors (Charts) and Ford (Charts) have both seen their cost of capital needed by their finance units rise due to the junk bond status for the two corporations. In response, GM announced in April it would sell a 51 percent stake in GMAC to a private equity firm, a deal that is now in the process of being closed.
Ford executives have previously said they weren't looking to sell a stake in Ford Credit, which like GMAC has been a major source of profits for the company that has been losing money on its core auto business. The Ford finance unit has a much more limited line of business than GMAC, which has a full line of mortgage and insurance offerings.
But while GM has moved to correct some of its financial problems this year, Ford has seen its problems worsen. In July its U.S. sales trailed Toyota for the first time in history and it slashed fourth quarter production plans by 21 percent to try to addressed continued weak sales, especially in its key light truck segment. It has said it will announce adjustments to its reorganization plan in September.
A sale of its Premier Auto Group, which includes the Jaguar and Land Rover brands, perhaps to a group led by former Ford CEO Jac Nasser, is another move that is reportedly being considered by Ford, as is a broader cash offer to union-represented workers at Ford to get them to retire or leave the company. The company may even consider taking itself private, according to one recent report.
Ford director Robert Rubin, a chairman of the executive committee at Citigroup (Charts), resigned from the Ford board Friday, saying that as the automaker "undertakes its upcoming review of strategic options, Citigroup's multi-faceted relationship with Ford could raise a question whether my relationship with Ford and Citigroup creates an appearance of conflict."
Citigroup has been working to expand its auto-lending portfolio, according to the News. The financial services firm was one of the key players in the GMAC deal.

FedEx, pilots' union agree on contract

After two years of talks, both sides reach a tentative four-year agreement.
CHICAGO (Reuters) -- Package delivery company FedEx Corp. and the association representing its pilots said Sunday they have reached a tentative agreement on a new four-year contract after more than two years of talks.
Memphis, Tenn.-based FedEx (Charts) and the Air Line Pilots Association International said the agreement - reached Saturday evening - is subject to review before being finalized.
FedEx's 4,700 pilots will then vote on whether to accept the new contract. If ratified, the contract will become amendable in 2010.
Negotiations on a new contract began in March 2004.
In June, FedEx rival United Parcel Service Inc. (up $0.57 to $70.57, Charts) reached a tentative agreement on a new labor contract with its pilots' union, after four years of talks.
A vote on that potential contract is expected by mid-September. Atlanta, Ga.-based UPS has some 2,700 pilots.

Microsoft unveils Windows, the Incan version

'Kichay': Men in ponchos gather with Microsoft executives in Bolivia's capital to launch new version of operating system.
SUCRE, Bolivia (Reuters) -- Microsoft launched a version of its software in the Incan language of Quechua Friday, boosting Bolivian President Evo Morales' quest to promote Bolivia's native tongues.
Some 200 people, many of them Quechuan Indians clad in ponchos, joined local Microsoft executives to unveil the version of the Windows operating system and Office software in Bolivia's constitutional capital.
"Open" is replaced by "Kichay" and "Save" by "Waqaychay" in the version in Quechua - a language spoken by more than 2.5 million people in Bolivia, and some 10 million throughout South America.
Since taking power in January, Morales, an Aymara Indian, has sought to promote Indian culture and end discrimination against indigenous peoples in South America's poorest country.
Government officials said they were excited about the new software but concerned it could be costly for many in Bolivia's poor indigenous majority.
"We congratulate Microsoft for having facilitated the use of computers in our own languages, but we have to advance towards systems that are more open because we still have to pay a license fee (to use the software) to Microsoft," Bolivia's Foreign Minister David Choquehuanca said.
Windows and Office In Quechua can be downloaded free from the Internet, but only by those who already own licensed versions of the software packages.
Maritza Yapu, a 28-year-old Quechua teacher, thinks the new version will help Quechua speakers breach the digital divide with Spanish speakers in Bolivia.
"Quechua is experiencing a revival, some university teachers read their courses in Quechua, and now the (education) Ministry is including the language in primary education," said the teacher.
The Quechua translation was carried out by academics from three Peruvian universities in coordination with the Education Ministry in Peru - where Quechua is also spoken - and Microsoft.

Beanstalk brainiacs

Study says tall people are smarter than their shorter peers.
NEW YORK -- While researchers have long shown that tall people earn more than their shorter counterparts, it's not only social discrimination that accounts for this inequality -- tall people are just smarter than their height-challenged peers, a new study finds.
"As early as age three - before schooling has had a chance to play a role - and throughout childhood, taller children perform significantly better on cognitive tests," wrote Anne Case and Christina Paxson of Princeton University in a paper published by the National Bureau of Economic Research.
The findings were based primarily on two British studies that followed children born in 1958 and 1970, respectively, through adulthood and a U.S. study on height and occupational choice.
Other studies have pointed to low self-esteem, better health that accompanies greater height, and social discrimination as culprits for lower pay for shorter people.
But researchers Case and Paxson believe the height advantage in the job world is more than just a question of image.
"As adults, taller individuals are more likely to select into higher paying occupations that require more advanced verbal and numerical skills and greater intelligence, for which they earn handsome returns," wrote the researchers.
For both men and women in the United States and the United Kingdom, a height advantage of four inches equated with a 10 percent increase in wages.
But the researchers said the differences in performance crop up long before the tall people enter the job force. Prenatal care and the time between birth and the age of 3 are critical periods for determining future cognitive ability and height.
"The speed of growth is more rapid during this period than at any other during the life course, and nutritional needs are greatest at this point," the researchers wrote.
The research confirms previous studies that show that early nutrition is an important predictor of intelligence and height.
"Research on the determinants of cognitive ability suggests an important role for nutrition, which may well prove to be a significant link between height and intelligence," they wrote.

U.S. brands becoming more 'likeable'

McDonald's, Coca-Cola are among American brands that are back in favor with global consumers.
NEW YORK -- U.S. brands, which have been on the receiving end of anti-American backlash overseas, are beginning to enjoy a resurgence in their "likeability" among global consumers.
This was the finding in the latest brand perception study from market research consultancy Gfk NOP. The study tracked consumer attitudes to top global brands in 25 countries.
Last year's report showed these brands were losing their luster in markets outside of the United States because of a backlash against all things American.
But U.S. brands have rebounded since then, said Jennifer James, consultant with Gfk NOP.
"There was some apathy for U.S. brands over the past two years. That's stabilized and we're seeing renewed interest in these brands," James said.
According to the Brand Power Study, which looked at a mix of 60 American and international brands, half of the 33 U.S. brands listed showed year-over-year increases in scores based on three key attributes important to consumers: familiarity, likeability and the likelihood that consumers would tell others good things about the brand.
Likeability scores increased for Coca-Cola (Charts) and McDonald's (Charts) in 2006 versus declines for both brands a year ago.
Other companies that performed well were MTV, Google (Charts), Yahoo (Charts) and MSN.
James said the revived interest in consumer products brands is partly driven by emerging markets for American products in China and India.
Moreover, she credits media and new media companies like MTV, National Geographic, Google and Yahoo for setting an example on how to become truly "borderless" brands.
Most of these brands have incorporated local flavor into their marketing and product offerings in their foreign markets because they want to be universally appealing rather than perceived to be projecting American culture, she said.
However, Ford, Disney, CNN, and Microsoft (Charts) were some of the brands that suffered declining scores.
CNN is a division of Time Warner (Charts), parent company of CNNMoney.com.
Besides catering to the local market, the report said American companies can boost their brand performance overseas by committing to product and service innovation and developing a brand identity that's promotes universal values like "enjoying life," "having fun," creativity" and "excitement."
The study was conducted between Nov. 2005 and January 2006 and based on a total of 30,000 interviews with consumers between the ages of 13 and 65.

Judge blocks strike at Northwest

Judge grants request of nation's No. 5 airline to keep flight attendants from striking just hours before it was due to start.
NEW YORK -- A federal judge blocked flight attendants from a strike at Northwest Airlines Friday afternoon, just hours before the union had said it would start to disrupt operations at the nation's No. 5 carrier.
Federal Judge Victor Marrero granted management's request for a temporary injunction against the Association of Flight Attendants-CWA, pending an appeal. The union has 7,300 members on the job at the airline.
Marrero ordered the two sides to resume negotiations towards a new labor agreement agreeable to both sides.
Northwest (Charts) issued a statement saying it welcomed the ruling.
"Our customers can continue to book Northwest with confidence," said the company's statement.
In a statement posted on the fight attendant union's Web site Mollie Riley, interim master executive council president said, "Management and the courts can stall us, but they cannot defeat us ... our crusade to protect our careers has only begun".
An attorney Northwest told the court that management believed an agreement could be reached, while a union attorney told the court that if the company approached them with a fair-minded offer, it would consider it, but they had yet to see that from management.
"This hearing today was not meant to be a negotiating session," Marrero said.
He told the two sides to report back to him Wednesday on the progress of talks, adding that it's in the interest of both sides to let cooler heads prevail and reach an agreement themselves, rather than leaving it in the hands of the court.
Trying to fly out of bankruptcy
The airline has been operating under bankruptcy court protection since September 2005, and had demanded $195 million in annual savings from AFA.
But while union negotiators have twice reached tentative agreements with the carrier on labor cost savings, the rank and file have twice rejected such deals in ratification votes, the second time by a 55-45 percent margin.
The union had not planned a complete shutdown of the carrier, which has about 1,200 daily flights. Instead it was planning to use a strategy it calls "Create Havoc Around Our System" or CHAOS, in which flight crews will not report for specific targeted flights, sometimes with little or no notice. That job action had been set to start at 10:01 p.m. EDT Friday.
Still, if the flight attendants had struck, it could have caused serious problems for some passengers as well as the airline's ticket sales.
Passengers whose flights are cancelled could have trouble finding empty seats on other carriers, particularly during the last week of the summer travel seasons. Airlines have filled a record percentage of available seats so far this summer.
While the leisure travel season will essentially come to an end with next weekend's Labor Day holiday, business travelers could soon decide to find alternatives to Northwest, especially if they see reports about stranded passengers on the news, according to travel experts.
"There isn't a high level of fear or concern now but there also won't be a lot of patience or tolerance for any problems," said Janet Wheatley, vice president of operations for Carlson Wagonlit Travel, a major business travel agency based in Minneapolis ahead of the decision. "The business traveler will react quickly if they see disruptions."
Northwest, which weathered a strike by its mechanics a year ago, has been operating under bankruptcy court protections since September.
Corey Caldwell, spokeswoman for the union, said a week ago that the union is not unwilling to discuss some level of wage or benefit cuts but that "our issue right now is that the concessions they're asking for is entirely too steep."
She said the pay of the most senior flight attendant at Northwest was cut to $33,000 a year from $42,000 a year under terms of the contract just imposed by management and that the hours worked every month increased by one third.
The company reported a net loss of $285 million in the second quarter, although excluding special items related to reorganization, it had a profit of $179 million.
The fuller aircraft and higher fares achieved by airlines this summer has allowed the industry to return to profitability after five years of steep losses, even though jet fuel prices have remained high.