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Strong Sell
Here's why I like Andrewilliamson's posts…He's a Bull that sees this company for what it is and doesn't try to blow smoke up everyone's ass with pump pieces. This is hard to follow, I know, but I'm way to lazy to format it. Basically It's Andre poking holes in Mr. Hankey's SA pump piece. Something I would love to do if Hankey had the balls to post here…. << Msg 3286 of 3286 at 10/01/2014, 11:15am by andrewilliamson In response to Re: "Tivo to transform..." yadayada by Hank Rearden (09/30/2014, 12:35pm) Re: "Tivo to transform..." yadayada First off, cripes. That's a lot of posts all of a sudden! Second, I appreciate the pushback. Wrestling over ideas is what these boards should be about. I remain unconvinced. I get that you're gung ho on the Tivo opportunity, but you're not the first. The biggest problem I see, though I may not have spelled it out directly, is not seeing the forest for the trees. Think of it this way: you think you're in a forest of trees with thickset fruit, but all there is, really, is a half dozen trees with a few juicy looking apples on them. Buying the forest would be a mistake. Enough analogizing. Getting down to specifics: Again, take a look at three year compound MSO sub growth. Stretching your past performance viewpoint back three years ignores the fact that MSO adds have flattened. It conveniently slips in a period, now past, where MSO adds were accelerating (and coming from a very small base). In other words, it dismisses recent performance and more heavily emphasizes past (now irrelevant) performance. On the lack of retail sub growth and even declines in retail subs, you are correct. However, nowhere in my thesis do I advocate that the retail business is set to take off. Instead, I think there's a good chance they can maintain existing subs in this business above 900K annually. Of course I am correct. I'm just typing the results published by TIVO. The reason I brought up retail, however, is because standalone declines, small though they may be, offset a sizeable chunk of new MSO revenues. Put another way, the decline in standalones is like losing a couple of second tier-MSO partners every year. Will Tivo standalones "asymptote" on the downside (e.g., a 900k floor?). Perhaps. The decline is gradual, and those remaining (myself included) are probably diehards, wanting the best, or both. I'm less convinced that 900k is the magic number, though. But yes, the decline in standalones may decelerate. Another possibility is that a much better option comes along, and makes a standalone irrelevant for half the remaining standalone base. Yet another reason I wouldn't bet on the 900k number. Virgin is ~60% penetrated. That leaves 40% left....TIVO ...has agreements in place with MSOs that provide a pool of ~12 million total subs. TIVO can triple its size. Making a claim that Virgin still has 40% opportunity to me seems like a colossal mistake. I credit you with ignorance rather than dishonesty here. The chances of Tivo capturing the remaining 40% of Virgin users in any meaningful timeframe is beyond lousy. If we are going to be serious, we need to talk about where the realistic maximum penetration is. I'm comfortable with 80%, but open to another figure. Of course, adds will slow down far before reaching that "asymptote," so that needs to be factored in as well as a realistic cap. The same exact "rule" applies for penetration of US MSOs, only I have argued that the maximum penetration for them will be far smaller, for reasons. TIVO's growth opportunity is untouched and global in scope, the company is better positioned than any other to exploit it and we are at an inflection point for its acceleration. You realize we've been hearing this for a decade, right? Is Tivo really at an inflection point? Really? I think MSO adds flattening out AND continued standalone declines are precisely data points that refute this argument. You can't extrapolate future revenue using the assumption MSO subs will only grow by ~300K / quarter as this fails to give TIVO credit for any future MSO wins that enlargens their pool of potential subs. Oh yes I can, and I'm merely working off Tivo's 17 year track record. TIVO gets credit for any future MSO wins when they get those wins. I generally caveat my opinion by saying that getting a few large players as partners would change the game, but that has not happened, nor do I have any reason to believe it will. Tivo has been hammering the international drum for over a decade, and we have just Virgin, Ono, and Com Hem to show for it. TIVO's service revenue will likely exceed ~$200 million next year. Total opex is ~ the same. As such, TIVO's service business should be break-even next year. The incremental contribution margin on new MSO service revenue is insane at ~65% (i.e., gross margins are ~65%-70% and assuming no to very little incremental opex). In effect, the business is just now inflecting into and above break-even and the business has incredible scale with each additional MSO sub / agreement. My point was that in 2018, the licensing revenue from AT&T/Vz/Goog/Dish ends, taking a chunk out of revenues. And that, back-of-the-envelope speaking, it leaves Tivo back treading water. And this all assumes millions more MSO subs by then (~5 million?). Perhaps I'm missing your math, though. When licensing revenues end, how many subs will Tivo have and what implied earnings will that provide? Ballpark numbers would be okay, one can piggyback off any analyst model, I'm sure I'd be comfortable with the most operating model metrics. I'm interested primarily in how many subs and what the bottome line will be in EPS come second half of 2018. A single win like Kabel in the next year, which would provide ~8 million digital subs to TIVO, which would see penetration growth by ~20% each year (similar to recent TIVO wins) would generate ~4.8 million additional TIVO subs in three years, or 1.6 million annually and 400K per quarter over that period, alone more than your 300K per quarter assumption. Tivo signed Kabel? That sounds fantastic! Erm...I missed that press release. You're not seriously bolstering your argument with fabricated, non-existent deals? Can I play too? How about I imagine that one of the Roamio components is defective and bricks 20% of units 18 months after they're put in use? See how this game works? It is not fair to make stuff up to make your case. I regularly concede that a couple of big wins would make a real difference. But all we have had have been a few medium wins (Virgin, Ono+ComHem, and a gaggle of NAm 2nd tiers). Again, Tivo has had a long time to sign a big fish, and we have had a lot of hot air blown up our...well, let's just say I puckered up waaaay before a lot of folks seem to have. Tivo can be successful long term - I hope it is wildly so - and I can have no interest in investing in it. There are loads of other investment opportunities out there, and one doesn't need to swing at everything. Finally, fwiw: I am the "blind long" I didn't say you were a blind long. I called your analysis that. Imo there is a difference between calling names and criticizing bad ideas / logic / reasons. Ideas can be stupid and people can be ignorant, and both can be pointed out. Calling someone stupid generally isn't helpful, nor is it generally accurate. I have blind and ignorant spots as well, of course, and would like to eliminate them, where possible. I could also use few whacks from a humilityhammer too. Is our fund long TIVO? Yes. Is the position imprudently large? I passed no judgment on your fund. Didn't even mention it. *** TL;DR - it will take an awful lot of MSO subs to offset the revenue implosion in 2018, and many many more to make Tivo attractive as an ongoing business to invest in. That said, should the stock price drop, the company has a lot going for it (cash, tech, relationships) that may once again make it a value play. You could translate that into "I don't see it worth betting on at $13, $14, or higher, but at $11, perhaps." 3 views0 recsView ThreadBack to Board >> |
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Msg # | Subject | Author | Recs | Date Posted |
121921 | Re: Here's why I like Andrewilliamson's posts… | tivonomo | 1 | 10/1/2014 11:45:02 AM |