TiVo revamps business plan, sheds workers
Published: 06 Apr 2001 07:53 BST
Digital video recorder company TiVo announced new operating plans Thursday that include laying off 80 employees, about a quarter of its work force.
TiVo said in a statement that the measures should eliminate the need to find additional funding in its current fiscal year ending January 31, 2002. A TiVo representative said the company had a work force of about 350, including temporary and contract workers. The layoffs are effective immediately.
The new plans will encourage subscriber growth while reducing operating expenses by 35 percent. The moves are to build off significant subscriber growth in its latest quarter. "We are implementing cost reductions and increasing revenues," TiVo Chief Executive Mike Ramsay said in the statement. "This gives TiVo the staying power to capitalise on its leadership position in personal TV and to execute on our service strategy."
TiVo reported that it expects to exceed consensus analyst estimates of subscriber numbers for the first quarter. The company closed regular trading Thursday up $1.09, or 27 percent, to $5.13.
The company also expects to reduce its cash burn rate by approximately $60m (£37m) for its current fiscal year, which should eliminate the need for the company to look for additional funding.
UBS Warburg started coverage of TiVo on Thursday at a "hold" rating. UBS analyst Tom Eagan said in a research note, "Although we expect TiVo subscribers to double from the past year...we expect the company to face a liquidity crunch, made difficult by unforgiving capital markets." The changes in the operating plans announced Thursday are to avoid having to looking for additional funding, according to company representatives. "Capital markets are a closed door with the way market conditions are at this time," TiVo spokeswoman Rebecca Baer said. "As a result, we are working proactively to be more self-sufficient."
In addition to the layoffs, other plans include developing a new design for cheaper recorders. Baer said the design has been in the works for several months and called it an "updated architecture taking into consideration some of the things we've learned thus far about our technology to lower cost."
TiVo will also work with partners, such as AOL and DirecTV, to market TiVo systems. The company is looking to reduce operating expenses by 35 percent this year. The company also will look to boost revenue by increasing the cost of a lifetime subscription to its service from $199 to $249. The increase will be effective May 1. Monthly subscribers will be able to convert to a lifetime subscription for $199. The monthly fee will not change.
The company has scheduled a conference call for analysts and investors tomorrow morning before the stock market opens to provide new revenue guidance based on its announcements from Thursday.
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