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Here are highlights from Monday's Analyst Blog:
TiVo Paused in Near-Term Growth
TiVo, Inc. (Nasdaq: TIVO | Quote | Chart | News | PowerRating) faces increasing competition from cable and satellite providers, who have also begun offering DVR services with its digital cable in one set-top box at no upfront costs and at comparable monthly subscription rates.
Despite superior functionality, TiVo's market share has shrunk since. Aggravating the share loss, DIRECTV (NYSE: DTV), which accounts for 2.8 million or nearly two-thirds of TiVo's subscriber base, began to offer a second competing HD DVR last year.
As a result, TiVo has experienced large subscriber attrition. Its new licensing deals with Comcast (Nasdaq: CMCSA | Quote | Chart | News | PowerRating) and Cox (NYSE: CXR) seem very unlikely to fill the subscriber and revenue gap left by the loss of DIRECTV, while TiVo's new TV ratings monitoring service, Stop//Watch will take many quarters to gain acceptance by all the major networks.
Moreover, TiVo's new pricing plans may slow subscriber attrition but will increase subscriber acquisition costs, slowing the path to positive EPS. Trading at 3x estimated 2008 sales, we think the stock incorporates Stop//Watch revenues, which is the only incremental earnings catalyst at this time.
Ace Limited's Outlook Limited
Ace Limited's (NYSE: ACE | Quote | Chart | News | PowerRating) operating earnings of $2.18 per share, substantially ahead of expectations, reflects the Combined Insurance acquisition and a favorable prior period reserve development. Underwriting results benefited from relatively better current accident year results and a lower level of catastrophe losses.
The company experienced growth in international operations, which benefited from a weaker U.S. dollar as well as growth in A&H and specialty lines. However, the global reinsurance business again reported a significant decline in this quarter and remains our matter of concern. We expect potential pressure on ACE's shares over the next couple of quarters, which should outweigh our growth expectations for this company at this time. Hence, we reiterate our Hold recommendation.
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