Sunday, October 09, 2005

TIVO: Sitting Pretty At a Paltry $5?

On Wall Street, the big deals -- and I mean the really big, " came out of left field" deals -- go down on the weekend.

The annals of Wall Street are filled with war stories like these:

It's Sunday night.

As the rest of America tunes into the Simpsons, CEOs, lawyers, and bankers are convening in a Manhattan skyscraper boardroom to put the finishing touches on a billon dollar deal before Monday's open.

Over the weekend, talk surfaced regarding an Apple/TIVO merger.

As Barry Ritholtz explains, TIVO's erratic behavior over the last year may be part of a plan in which management sheds the struggling DVR service provider:
TIVO management seems to be all over the place, both philosophically and managerially. Their business model is suffering, and despite having first mover advantage and the best product in the category, they don't seem to be able to make a buck. We reached a few interesting conclusions: a) TiVo's recent shifts are not random, and are probably in response to some longer term strategic shifts; 2) something significant was going on with the company. Our best guess (and this is only a guess, with a smidgen of wishful thinking thrown in) is that TiVo is about to be bought. Their market cap is well under $1/2B, and so for a minor premium -- wild guess: $750 million or $8 a share in stock -- they get taken out; Sooner rather than later -- probably over the next month or so. The firm that makes the most sense to grab them is Echostar.
Interesting hypothesis.

As Barry notes, TIVO's management is inconsistent, and with the Direct TV threat so palpable, selling TIVO to a better grounded company that can then monetize services and rollout product to a large, installed base -- well, the idea makes too much sense to chuck into the speculation bin.

TIVO's days of great product & poor execution may soon be over.

At $5 dollars a share, TIVO is buyout bait.

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