TiVo 2005 Annual Report Download - page 19

Table of Contents
In addition, we face the following risks in relying on these third parties:
If our manufacturing relationships are not successful, we may be unable to satisfy demand for our products and services. We manufacture DVRs that
enable the TiVo service through a third-party contract manufacturer. We also have entered and anticipate entering into agreements with consumer electronics
manufacturers to manufacture and distribute DVRs that enable the TiVo service. However, we have no minimum volume commitments from any
manufacturer. The ability of our consumer electronics manufacturers to reach sufficient production volume of DVRs to satisfy anticipated demand is subject
to delays and unforeseen problems such as defects, shortages of critical components and cost overruns. Moreover, they will require substantial lead times to
manufacture anticipated quantities of the DVRs that enable the TiVo service. Delays, product shortages, and other problems could impair the retail
distribution and brand image and make it difficult for us to attract subscriptions. In addition, the loss of a manufacturer would require us to identify and
contract with alternative sources of manufacturing, which we may be unable to do and which could prove time-consuming and expensive. Although we expect
to continue to contract with additional consumer electronics companies for the manufacture of DVRs in the future, we may be unable to establish additional
relationships on acceptable terms.
We are dependent on single suppliers for several key components and services. If these suppliers fail to perform their obligations, we may be unable to
find alternative suppliers or deliver our products and services to our customers on time. We currently rely on sole suppliers for a number of the key
components used in the TiVo-enabled DVRs and the TiVo service. For example:
• Broadcom is the sole supplier of the MPEG2 encoder and decoder semiconductor devices;
• Amtek is the sole supplier of the chassis; and
• Remote Solutions is the sole supplier of remote controls and bezels.
We do not currently have written supply agreements with these suppliers. Therefore, they may not be contractually obligated to supply us with these
key components on a long-term basis or at all. In addition to the above, we have several sole suppliers for key components of our products currently under
development.
Tribune is the sole supplier of the program guide data for the TiVo service. Tribune Media Services, Inc., or Tribune, is the current sole supplier of
program guide data for the TiVo service. Our current Television Listings Data Agreement with Tribune became effective on March 1, 2004 and has an initial
term of three years and will automatically renew for up to two additional terms of one year each unless we notify Tribune of our desire to terminate the
agreement at least 90 days before the end of the then-current term. If Tribune breaches its obligation to provide us with data, or otherwise fails to perform its
obligations under our agreement, we would be unable to provide certain aspects of the TiVo service to our customers. This would have serious repercussions
on our brand and our ability to succeed in the market. We may be unable to secure an alternate source of guide data on acceptable terms.
If our arrangements or our consumer electronics manufacturers' arrangements with Broadcom, Amtek, Remote Solutions or Tribune were to terminate
or expire, or if we or our manufacturers were unable to obtain sufficient quantities of these components or required program guide data from our suppliers, our
search for alternate suppliers could result in significant delays, added expense or disruption in product or service availability.
We depend upon third parties to provide supply chain services related to inventory management, order fulfillment, and direct sales logistics. We rely on
third party vendors to provide cost-effective and efficient supply chain services. Among other activities, these outsourced services relate to direct sales
logistics, including order fulfillment, inventory management and warehousing, and distribution of inventory to third party retailers. If one or several of our
third party supply chain partners were to discontinue services for us, our ability to fulfill direct sales orders and distribute inventory timely, cost effectively, or
at all, would be hindered which could in turn harm our business.
We are dependent on our major retail partners for distribution of our products to consumers. We currently rely on our relationships with major retail
distributors including Best Buy, Circuit City, Fry's Electronics, and others for distribution of TiVo-enabled DVRs. We do not typically enter into long-term
volume commitments with our major retail distributors. If one or several of our major retail partners were to discontinue selling our products, the volume of
TiVo-enabled DVRs sold to consumers could decrease which could in turn harm our business.
Intellectual property claims against us could be costly and could result in the loss of significant rights.
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