Talk of a possible linkup between Netflix (NFLX Quote) and TiVo (TIVO Quote) ignited a rally in two downtrodden tech favorites Tuesday.
Both stocks jumped 16% in midday trading after Newsweek reported that the companies are teaming up to deliver movie rentals over the Internet. But observers warned that the deal, while promising, appears likely to encounter the same cutthroat competition that already has laid low shares in both companies.
Quoting an anonymous insider reportedly close to the negotiations, Newsweek indicated that a deal was all but complete, needing only approval from TiVo's board of directors. The new venture, according to Newsweek, would allow people who subscribe to both services to download Netflix DVDs over the Internet directly to their TiVo boxes.
Spokespersons for Netflix and TiVo didn't return phone calls Tuesday morning. Shares in Netflix rose $2.41 to $16.77 Tuesday, while shares in TiVo rose 72 cents to $5.14.
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