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Comcast Corporation (CMCSA), DirecTV (DTV): Should You Love or Hate TiVo Inc. (TIVO)?

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DIRECTV (NYSE:DTV)TiVo Inc. (NASDAQ:TIVO) is both loved and hated on Wall Street. The DVR pioneer’s unusually high proportion of shorts think shares have only risen because of the broader market’s rally, while longs think the stock has more room to rise on its own merits. As you’ll see below, one of these factions has much better odds of being proven right.

Ominous signs

TiVo Inc. (NASDAQ:TIVO)’s largest revenue stream is its direct-to-consumer DVR service. For many years, TiVo’s technology was light-years ahead of the competition. However, TiVo rested on its laurels instead of constantly innovating, improving, and expanding. With more consumers opting for other DVR services, TiVo Inc. (NASDAQ:TIVO) now finds itself falling behind industry trends.

Due to rising competitive threats, TiVo’s R&D costs have increased. Couple that with ongoing losses and management’s uncertainty of future profitability, and TiVo Inc. (NASDAQ:TIVO) seems far from a safe investment. Last year, TiVo reported a net loss of $5.3 million, and it expects Generally Accepted Account Principle (GAAP) losses to continue for Fiscal Year (FY) 2014.

“We have incurred significant net losses, and we may never achieve sustainable profitability,” management said. According to the company, TiVo must also make more money or spend less in order to avoid running out of cash.

Competitive threats

TiVo faces formidable competition from Comcast Corporation (NASDAQ:CMCSA), DirecTV (NASDAQ:DTV), DISH Network Corp (NASDAQ:DISH), Time Warner Cable, Apple, Google, and more.

If a small technology company creates a great product and succeeds, it’s often only a matter of time before larger companies come along, steal the same concepts, and crush that smaller player. Unfortunately, TiVo wasn’t savvy enough to find ways to innovative and form enough partnerships in order to avoid this pattern. TiVo Inc. (NASDAQ:TIVO) instead took its rivals to court, which has helped the company generate revenue, but TiVo can’t rely on this approach forever.

Comcast Corporation (NASDAQ:CMCSA)’s marketing budget and enormous reach could make this year’s impending launch of its X2 — a hard drive capable of saving 150 hours of high-definition content — a serious threat to TiVo. The X2 accesses programming from a multitude of devices through the cloud, accepts voice commands, and offers customers flexible pricing based on the content they watch.

DirecTV (NASDAQ:DTV)’s Genie offers different types of features, including the ability to watch five shows at once on only one box, three times more recording capability than cable, and being able to watch shows from up to five weeks back.

DISH Network Corp (NASDAQ:DISH)’s Hopper allows customers to watch live and on-demand television from anywhere, and you can record up to six shows at once. DISH Network Corp (NASDAQ:DISH) also offers 24/7 customer service, which makes it unique in the industry.

With certain TiVo models, you can record up to four shows at once, and you can record a season of a TV show with a Season Pass. But you can’t go back to watch shows from five weeks back, like DirecTV (NASDAQ:DTV)’s Genie. And unlike Dish, TiVo Inc. (NASDAQ:TIVO) offers only limited customer service hours.

All four of these companies have seen consistent top-line growth, but only Comcast Corporation (NASDAQ:CMCSA) and DirecTV (NASDAQ:DTV) have been consistent on the bottom line, whereas TiVo — like Dish — has not. Comcast Corporation (NASDAQ:CMCSA) looks to be the safest option of the bunch; DirecTV (NASDAQ:DTV) has seen the domestic market mature, and increased competition has made its prospects in Latin America look dimmer than they once did. Comcast Corporation (NASDAQ:CMCSA) is also the only company of the four that pays a dividend, currently yielding 1.70%.

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