TiVo Inc. (TIVO) and Norway-based Opera Software recently entered into a partnership that will allow the former to add Opera Devices SDK and Opera TV Store to its newly- launched Roamio DVRs.
Opera is a well-known provider of Internet based-technologies to makers of set-top boxes and connected televisions. The Opera Software SDK was shipped to more than 25 million households in 2012. The Opera TV store was also available to more than tens of millions households at the end of last year.
The partnership will enable TiVo to offer HTML-5 based applications to its customers. Moreover, developers will be able to use the software development kit (“SDK”) to build TiVo-specific applications, which the company will offer at the time of its launch of App-Store later this year.
TiVo is expected to offer Opera’s TV app store to its customers by early 2014. The integration will help TiVo to offer new innovative products such as Opera Snap, an application that can convert online videos to connected TV apps.
Opera’s strong clientele and partnerships with popular content providers such as Google’s (GOOG) YouTube who are increasingly adopting HTML-5 is a major positive for TiVo. This will make the DVR platform much more attractive for advertisers.
Moreover, the addition of the new features on Roamio will boost subscriber base going forward. At the end of the recently concluded second quarter, TiVo’s total subscriber base was 3.62 million compared with 3.40 million in the previous quarter and 2.72 million in the year-ago quarter.
Although the resolution of patent litigation issues removes a major overhang on TiVo, we believe that innovation is of utmost importance to the company to sustain profitability going forward. In this regard, TiVo’s focus on forging deals with mid-tier operators (who will not build their own offering) is a prudent move in our view.
We believe that TiVo has significant growth opportunities in Western Europe and Latin America, given its partnerships with local providers. TiVo’s strong balance sheet will also enable the company to pursue strategic acquisitions. Its aggressive share buyback program will boost growth in the near term.
However, increasing competition from the likes of DirecTV (DTV) and Apple (AAPL) remains a major overhang. Additionally higher investments on research and product developments will keep margins under pressure in the near term.
Currently, TiVo has a Zacks Rank #3 (Hold).
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