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TiVo Partners Midcontinent

Zacks Equity Research

TiVo Inc. (TIVO) recently announced a partnership with Midcontinent Communications. According to the terms of the agreement, Midcontinent Communications will use TiVo’s solutions and products to offer next generation home television services to its customers.

Midcontinent Communications provides data, video, phone and cable advertising services to residential as well as business clients of Minnesota, Wisconsin, North Dakota and South Dakota. It will now use TiVo’s whole-home and multi-screen suites to deliver its services. TiVo solutions will also form the interface using which Midcontinent’s customers will get to view content through linear cable television, video on demand and broadband.

According to the company, customers of South Dakota would be the first ones to receive TiVo’s services and products. Thereafter, Midcontinent Communications plans to offer these services across its network.

TiVo has been focusing on partnerships and strategic alliances to drive subscriber growth. TiVo has a number of partnerships with major companies including Comcast Corp. (CMCSA), Charter Communications, RCN and Suddenlink. TiVo also expanded its services globally through partnerships with ONO, Virgin Media Inc. (VMED) and Canal Digital (in Scandinavia).

In the first half of 2012, TiVo entered into a partnership with Pace, a leading developer of technologies and services for the broadcast and broadband industries. TiVo also signed an agreement with Sweden’s largest cable operator Com Hem. Furthermore, TiVo extended its partnership with Ono, Spain’s largest cable operator.

We believe that TiVo will continue to pursue opportunities for developing strategic partnerships with cable operators both in the domestic as well as international markets in order to boost its subscriber base going forward. We believe that these partnerships will also help in reducing competition over the long term.

However, pending patent litigation issues, rising subscription acquisition costs and higher research and development expenses are expected to impact TiVo’s profitability over the next few quarters.

Thus, we have a Neutral recommendation on TiVo over the long term (6-12 months). Currently, TiVo has a Zacks #3 Rank, which implies a Hold rating for the short term (1-3 months).

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