A year after TiVo Corp. embarked on a “strategic review” of its business, it still hasn’t found a strategy for investors to review.
On Feb. 27, 2018, TiVo said it was “evaluating a wide range of strategic alternatives to realize long-term shareholder value,” ranging from “transformative acquisitions that would accelerate our growth ... to combining our business with other leading players, to becoming a private company.” On Tuesday, the company had nothing new to report after a year of investigating those avenues — except a 21% drop in fourth-quarter revenue, among other worrisome financial results — and shares of TiVo TIVO, +0.09% tumbled more than 10% in after-hours trading.
TiVo — which was purchased in 2016 for $1.1 billion by Rovi Corp., a company that largely subsists on patent-license fees for electronic viewing guides and video-on-demand services and changed its name to TiVo — has teased investors for 12 months with thoughts that it will find a buyer. Many analysts and investors hope that TiVo might be acquired by a company like Roku Inc. ROKU, +0.32% , whose co-founder and CEO Anthony Wood invented the first DVR before losing to the original TiVo.
In a conference call Tuesday with the handful of analysts who still follow the company — FactSet tracks three analysts who still bother, a total that has been halved over the past year — nearly every question centered around the process. Why was the review even necessary if TiVo is working on a streaming product? What was the point of the merger with Rovi? Why is this taking so long?
B. Riley & Co. analyst Eric Wold sounded exasperated in discussing five “growth pillars” that TiVo executives outlined, even as it continues to look for a different direction, which could include splitting off the TiVo and Rovi businesses that were merged less than three years ago.
“I’m trying to understand how we balance the continuous strategic review process... [with] the five growth pillars you laid out for growth heading into 2019, which I would suspect if someone was to acquire one or both of those business, those growth pillars would be somewhat meaningless,” Wold said in a question to executives. “Why pursue such a dramatic five-pillar process if you think you’re close to a strategic outcome?”
The response from TiVo’s interim chief executive, Raghavendra Rau, the company’s third CEO in three years, was defensive and devoid of much substance.
“Essentially, what we’re doing here, and it’s really important, is that we’re focusing on both the product business and the IP business for growth and profitability,” Rau said.
Another analyst voiced frustration with the process and asked at what point the company just calls it a day, or as it was more delicately phrased, “is there a line in the sand that you’ll draw?”
In response, Rau said that the process has taken longer than expected “because of the complexity and uniqueness of our two businesses,” and basically admitted they aren’t going to be done in the next three months.
“We’re hoping that we’ll give you another update to the next quarter based on the ongoing discussions that we are having,” he said. “But beyond that I’m not willing to put a time limit on when this will happen.”
TiVo is starting to look like a house that has sat on the market for too long — potential buyers obviously think the asking price is too high, yet the sellers are stubbornly holding out. In that analogy, investors would be the realtor, waiting for a payoff that may never come.
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