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Viva TiVo! Uh, Not Quite yet

George Mannes

Personal video recorder company TiVo (TIVO Quote - Cramer on TIVO - Stock Picks) cut its losses for the second quarter ended July 31.

But on the supply side, the money-burning PVR marketer disclosed that it reaped less cash than people may have assumed from its $51.8 million convertible debt deal announced Wednesday.

After the market's close Thursday, the PVR marketer reported a net loss of $34.5 million or 82 cents per share, compared with a loss of $39 million, or $1.09 per share, in the quarter ended July 31, 2000. Analysts surveyed by Thomson Financial/First Call had expected a 94-cent loss. Revenues, which amounted to $869,000 a year ago and $3.2 million in the first fiscal quarter ended April 30, reached $4.1 million, in line with expectations.

Ahead of the financial release, TiVo's shares fell 24 cents to close at $5.90. In after-hours trading on Island following the completion of a conference call with analysts, the company's shares changed hands at $6.30.

TiVo said Thursday that the company had netted $40.8 million from the private placement of convertible debt. Most of the $11 million difference between that number and the face value of the deal comes to TiVo in the form of advertising and promotional credits with General Electric's (GE Quote - Cramer on GE - Stock Picks) NBC unit and Liberty Media-affiliated Discovery Communications, two TiVo investors that participated in the convertible deal.

While TiVo essentially reiterated nearly all previously set financial goals, including its intention to reach operating cash flow break-even by January 2003, the company faces no small challenge to meet its goals for the fiscal year ending Jan. 31, 2002. The company said in July it expected negative operating cash flow for this fiscal year to range between $110 million and $120 million.

Following a cash burn from operations of $50.5 million in the first fiscal quarter ended April 30, TiVo reported it had cut operating cash usage 40% sequentially, indicating a $30 million burn for the second quarter, totaling $80 million for the first half of the year. Subtracting that number from the full-year guidance implies that TiVo will have to cut the quarterly cash burn further, to an average of $15 million to $20 million per quarter for the second half of the fiscal year.

On Thursday evening, it wasn't immediately clear whether TiVo's new credits with NBC and Discovery would affect cash outlays for sales and marketing expenses.

But the bleak advertising climate may have hindered TiVo's ability to sell advertising on its own service. When the company announced first fiscal quarter results in May, it announced an advertising revenue backlog of $1 million. The company didn't provide a similar figure this quarter and declined to provide a specific number for advertising-related revenues.