UPDATE: TiVo 3Q Loss Widens On Lower Revenue, Higher Costs

TiVo Inc.'s (TIVO) fiscal third-quarter loss widened as the digital-video recording company focused on a new pricing scheme in hopes of increasing future profits.

The Alviso, Calif.-based company recently tweaked retail prices ahead of the holiday shopping season, offering its set-top box to consumers at a dramatic upfront discount in exchange for higher monthly subscription costs.

"We're strengthening the business model," Chief Executive Tom Rogers told Dow Jones Newswires.

TiVo said if it hadn't engaged in this new pricing scheme, the company's income would have exceeded expectations. TiVo also said it expects material increases in revenue per subscriber in the current quarter.

Still, TiVo's efforts did not offset lost subscribers as a result of delays related to its partnership with DirecTV Group Inc. (DTV). In the most-recent quarter, the company lost 112,000 subscribers, compared with 314,000 lost a year earlier. Its total customer base is 17% smaller than it was a year earlier and stands at 2.3 million.

For the period ended Oct. 31, TiVo reported a loss of $20.6 million, or 18 cents a share, compared with a year-earlier loss of $6.4 million, or six cents a share. Revenue fell 11% to $50.9 million as service and technology revenue slid 12% to $41.3 million.

The company in August forecast a loss of $19 million to $21 million on service-and-technology revenue of $40 million to $42 million.

Gross margin narrowed to 45.7% from 46.8%, and operating expenses increased 32% as the company spent more on research and development as well as general overhead expenses.

Meanwhile, a federal appeals court is hearing a high-stakes patent dispute between TiVo and rivals Dish Network Corp. (DISH) and EchoStar Corp. (SATS) over DVRs. In March, a three-judge panel of the court sided with TiVo in a 2-to-1 ruling, but in May, the appeals court withdrew its ruling for TiVo. A win for TiVo could help the company in other related litigation.

TiVo on Tuesday said it expects a decision from the court in the "next several months," and said it remains confident.

Earlier Tuesday, investment firm Kaufman Bros. said it was maintaining its hold investment rating on TiVo's shares, saying right now, investment lies entirely on the litigation outcome. The firm added that recently, shares have performed poorly because strident questioning from a few of the judges on the panel was perceived as negative for TiVo.

Shares fell 3.3% to $8.52 in after-hours trading. The stock is down 13% this year through Tuesday's close.

-By Ian Sherr and John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

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