TiVo 2005 Annual Report Download - page 26

Table of Contents
If we fail to manage the growth and complexity of our activities, it could disrupt our business and impair our ability to generate revenues.
The growth in our subscription base and increasing complexity of our sources of other revenue have placed, and will continue to place, a significant
strain on our management, operational and financial resources and systems. Specific risks we face as our business expands include:
Any inability of our systems to accommodate our expected subscription growth, or any inability of our TiVo.com website to handle expected customer
traffic, may cause service interruptions or delay our introduction of new services and limit our ability to sell the TiVo service and TiVo-enabled DVRs. We
internally developed many of the systems we use to provide the TiVo service and perform other processing functions. The ability of these systems to scale as
we rapidly add new subscriptions is unproven. We must continually improve these systems to accommodate subscription growth and add features and
functionality to the TiVo service. Our inability to add software and hardware or to upgrade our technology, systems or network infrastructure could adversely
affect our business, cause service interruptions or delay the introduction of new services. Our inability to manage customer traffic and sales volume through
our TiVo.com website could limit our ability to sell the TiVo service and TiVo-enabled DVRs in the future. If our website were to become unavailable for a
significant amount of time, our ability to provide certain features of the TiVo service and our ability to service customers and sell the TiVo service and TiVo-
enabled DVRs would be harmed.
We will need to provide acceptable customer support, and any inability to do so would harm our brand and ability to generate and retain new
subscriptions. Our ability to increase sales, retain current and future subscriptions and strengthen our brand will depend in part upon the quality of our
customer support operations. Some customers require significant support when installing the DVR and becoming acquainted with the features and
functionality of the TiVo service. We have limited experience with widespread deployment of our products and services to a diverse customer base, and we
may not have adequate personnel to provide the levels of support that our customers require. In addition, we have entered into agreements with third parties to
provide this support and will rely on them for a substantial portion of our customer support functions. Our failure to provide adequate customer support for the
TiVo service and DVR will damage our reputation in the digital video recorder and consumer electronics marketplace and strain our relationships with
customers and consumer electronics manufacturers. This could prevent us from gaining new or retaining existing subscriptions and could cause harm to our
reputation and brand.
We will need to improve our operational and financial systems to support our expected growth, and any inability to do so will adversely affect our
billing and reporting. To manage the expected growth of our operations, we will need to improve our operational and financial systems, procedures and
controls. Any inability to do so will affect our billing and reporting. Our current and planned systems, procedures and controls may not be adequate to support
our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and
controls: could adversely affect our relationships with our customers; cause harm to our reputation and brand; and could also result in errors in our financial
and other reporting.
We must manage product transitions successfully in order to remain competitive.
The introduction of a new product or product line is a complex task, involving significant expenditures in research and development, training,
promotion and sales channel development, and management of existing product inventories to reduce the cost associated with returns and slow moving
inventory. As new products are introduced, we intend to monitor closely the inventory of products to be replaced, and to phase out their manufacture in a
controlled manner. However, we cannot assure you that we will be able to execute product transitions in this manner or that product transitions will be
executed without harming our operating results. Failure to develop products with required features and performance levels or any delay in bringing a new
product to market could significantly reduce our revenues and harm our competitive position.
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