TiVo 2006 Annual Report Download - page 13

Table of Contents
Fiscal Year Ended
January 31,
TiVo Inc. 2007 2006 2005
(in millions)
Research and Development Expenses $ 50.7 $ 41.1 $ 37.6
Although our total company employee headcount increased by approximately 7% in fiscal year 2007, we increased the number of our regular,
temporary, and part-time employees engaged in research and development by 9% from a total of 264 to 288 as of January 31, 2007 compared to January 31,
2006.
Manufacturing and Supply Chain
We outsource the manufacturing of our products to third-party manufacturers. This outsourcing extends from prototyping to volume manufacturing and
includes activities such as material procurement, final assembly, test, quality control, and shipment to distribution centers. Today the majority of our products
are assembled in Mexico. Our primary distribution center is operated on an outsourced basis in Texas.
The components that make up our products are purchased from various vendors, including key suppliers such as Broadcom, which supplies
microprocessors. Some of our components, including microprocessors, chassis, remote controls, and certain discrete components are currently supplied by
sole source suppliers.
Seasonality
Sales of our DVRs and subscriptions to the TiVo service are affected by seasonality. Thus, we generate a significant number of our annual DVR sales
and new subscriptions during and immediately after the holiday shopping season with associated increases in revenue. We also incur significant increases in
expenses in the second and third quarter related to hardware costs, rebates, revenue share and other payments to channel, and sales and marketing expenses in
anticipation of the holiday shopping season.
Competition
We believe that the principal competitive factors in the DVR market are brand recognition and awareness, functionality, ease of use, availability, and
pricing. We currently see two primary categories of DVR competitors: DVRs offered by satellite, cable, and telecommunications operators and DVRs offered
by consumer electronics and software companies.
Satellite, Cable, and Telecommunications, DVR Competitors. We compete against cable and satellite set-top boxes that integrate DVR functionality.
• Satellite: EchoStar offers a range of DVR models, including standard definition and high definition models, most of which offer dual tuner
capabilities. Certain models can output signals to multiple TVs within the household. DIRECTV has introduced a DVR technology from NDS
including both standard definition and high definition broadcasts.
• Cable: Cable operators have made DVR technology available on set-top boxes such as from Scientific-Atlanta (owned by Cisco) and Motorola.
These products combine digital and analog cable reception with DVR functionality; some versions offer dual tuner and/or high definition
capabilities. Other competition in the cable DVR market comes from other software providers including TV Guide, Microsoft, Aptiv, Digital, and
Digeo.
• Telecommunications: Telecommunications operators have recently begun to commercially deploy DVR technology in connection with the
provision of television services to consumers either in partnership with other television providers, such as
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