Registered: Aug 2003
Location: Cleveland, OH
DirecTv Sold Stake in TiVo
From the WSJ online edition:
DirecTV Sold Stake
In TiVo, Analyst Says
By ROGER CHENG
DOW JONES NEWSWIRES
June 8, 2004 2:23 p.m.
DirecTV Group Inc. sold its entire stake in TiVo Inc., an analyst report said, prompting a selloff in shares of the digital-video recorder Tuesday.
In a research note Tuesday, William Blair & Co. analyst David Farina said DirecTV sold its entire 3.5 million stake in TiVo shares Monday night for about $7.20 a share. Spokesmen for both TiVo and DirecTV weren't immediately available to comment on the reported sale, which comes shortly after Eddy Hartenstein, vice chairman of DirecTV, stepped down from TiVo's board of directors.
As a result of Friday's resignation and the reported sale, Adams Harkness & Hill analyst Steven B. Frankel downgraded TiVo to "market perform" from "buy" on the belief the relationship between the two companies is getting clouded.
Despite the impressive DirecTV-related subscriber additions in the recent quarter, investors can't help but be concerned over where the TiVo-DirecTV relationship is headed, Mr. Frankel said in a research note. The analyst noted this is a "likely signal that DirecTV is looking to pull away from TiVo."
Mr. Farina, however, said he believes DirecTV is selling its stake to clean up its balance sheet. The company said Tuesday it sold its 55% stake in Hughes Software Systems to Flextronics International Ltd. If the sale signified a material shift in its relationship with TiVo, DirecTV would have to disclose that, she said.
TiVo shares dropped 73 cents, or 9.7%, to $6.77 in afternoon trading Tuesday on the Nasdaq Stock Market.
DirecTV is owned by Rupert Murdoch's News Corp., which also controls set-top box maker NDS Group PLC. NDS has been working to introduce its own digital-video recorder technology, possibly through DirecTV or cable operators. NDS's offering would compete directly with TiVo's own recorder.
The potential loss of DirecTV as a partner would be a critical blow to the company. "We are highly dependent on our relationship with DirecTV for subscription growth," the company said in its annual 10-K filing with the Securities and Exchange Commission.
In the first quarter, TiVo added 196,000 new users through DirecTV. In comparison, the company added 68,000 new users under its standalone TiVo-branded product.
DirecTV accounts for about 55% of TiVo's subscriber base, Mr. Frankel noted. The analyst doesn't own a stake in TiVo, but Adams Harkness & Hill is seeking an investment banking relationship.
Write to Roger Cheng at email@example.com
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