TiVo 2003 Annual Report Download - page 57

Table of Contents
TIVO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
TiVo Inc. (the "Company" or "TiVo") was incorporated in August 1997 as a Delaware corporation and is located in Alviso, California. On August 21,
2000, TiVo (UK) Ltd., a wholly owned subsidiary of TiVo Inc., was incorporated in the United Kingdom. On October 9, 2001, the Company formed a
subsidiary, TiVo International, Inc., also a Delaware corporation. On January 12, 2004, the Company acquired Strangeberry Inc., a small Palo Alto based
technology company specializing in using home network and broadband technologies to create new entertainment experiences on television.
TiVo is a provider of technology and services for digital video recorders, or DVRs. The Company has developed a subscription-based television service
(the "TiVo service") that allows consumers to record, watch, and control television. The TiVo service also offers the television industry a platform for
advertisers, content delivery, and audience research. The TiVo service requires a TiVo-enabled DVR or set-top box. These may be purchased at major
consumer electronics retailers throughout the United States or through the Company's website. Many currently available TiVo-enabled DVRs are broadband-
enabled and offer customers the ability to enjoy digital music and photos.
The Company continues to be subject to a number of risks, including the uncertainty of market acceptance of the TiVo service and future profitability;
competition; the dependence on third parties for manufacturing, marketing, and sales support; the intellectual property claims against the Company; and its
highly dependent relationship with DIRECTV. The Company conducts its operations through one reportable segment. The Company anticipates that its
business will continue to be seasonal and expects to generate a significant number of annual new subscriptions during and immediately after the holiday
shopping season.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All inter-company accounts and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions. Actual results could differ from those estimates.
Inventories
TiVo introduced its Series2 TiVo-enabled DVRs in January 2002. The Company sells these units to certain retailers and distributors, including Best
Buy, who make the recorders available nationwide in retail stores as well as through TiVo's own online direct sales. As part of these hardware sales activities,
TiVo maintains a finished goods inventory of the TiVo-enabled DVRs throughout the year. Inventories are stated at the lower of cost or net realizable value,
with cost determined on the first-in, first-out method (see Note 13. "Sales of Series2 Platform").
Accounts Receivable – Related Parties
Accounts Receivable–related parties consist of amounts owed to the Company from companies such as DIRECTV, Inc. ("DIRECTV"), Philips
Business Electronics B.V. ("Philips"), Maxtor Corporation ("Maxtor"), and Sony Corporation of America ("Sony"). These receivables are comprised of
subscription revenue collected from subscribers on the Company's behalf, volume discounts and amounts owed under technology revenue contracts.
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