The partnership will provide TiVo products a vast distribution platform and Best Buy a digital platform to promote its digital content services through TiVo’s DVR offerings. Best Buy will market TiVo’s digital video recording products through its 1,100 stores in the United States.
Both TiVo and Best Buy plan to develop user interface features for TiVo DVRs to be sold by the latter. The features will provide a platform to communicate with subscribers and facilitate smooth access to Best Buy’s various retail offerings.
TiVo also intends to integrate its user interface, search function and Internet-delivered content like on-demand movies from Amazon (AMZN) and Netflix (NFLX) with Best Buy’s exclusive Brands group – Insignia and Dynex – by way of licensing its technology. TiVo also has licensing deals with DirecTV (DTV), Cox, and Comcast (CMCSA).
TiVo is not immune to the current challenging economic environment as consumer electronics sales are declining. The company is facing erosion in its subscriber base. The economic downturn has made operations more difficult.
The company has announced headcount reductions and lowered its marketing budget substantially. We believe that the deal with Best Buy will provide an impetus to TiVo, which is struggling to increase its subscriber base.
We maintain our Hold recommendation on the stock with a six-month target price of $8.00.
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