TiVo 2007 Annual Report Download - page 25

Table of Contents
We will need to provide acceptable customer support, particularly with respect to installation of DVRs and CableCards, and any inability to do so
would harm our brand and ability to retain current subscriptions and generate 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, including our ability to assist customers with
installation and CableCard-related issues. Some customers require significant support when installing the DVR and required CableCards for certain model
DVRs and becoming acquainted with the features and functionality of the TiVo service. We have limited experience with widespread deployment of our
products, services, and CableCard installation requirements 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. Furthermore, the installation of CableCards for TiVo customers is performed by third party cable
operators and TiVo is dependent on such parties to timely service new subscribers to enable their receipt of digital and premium cable content. Our failure to
provide adequate customer support for the TiVo service, DVRs, and CableCards 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, increasingly complex business arrangements, and rules
governing revenue and expense recognition and any inability to do so will adversely affect our billing and reporting. We have increasingly complex business
arrangements, and the rules which govern revenue and expense recognition in our business are increasingly complex as well. To manage the expected growth
of our operations and increasing complexity, we will need to improve our operational and financial systems, procedures and controls and continue to increase
systems automation to reduce reliance on manual operations. 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 complex arrangements and the rules governing revenue and expense recognition for 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.
If we fail to adequately manage our increasingly complex licensing, development, and engineering services agreements, we could be subjected
to unexpected costs and incur losses which could adversely affect our business.
We engage in licensing, development, and engineering services agreements with our customers, such as Comcast, Cox, and DIRECTV. These types of
contracts are typically long-term and complex. The engineering services we agree to provide may be essential to the functionality of the licensed software or
such software may involve significant customization and modification. We believe we are able to make reasonably dependable cost estimates based on
historical experience and various other assumptions. These estimates are assessed continually during the term of the contract and revisions are reflected when
the conditions become known. Using different cost estimates related to engineering services may produce materially different results for related expenses and
revenues. A favorable change in estimates in a period could result in additional revenue and profit, and an unfavorable change in estimates could result in a
reduction of revenue and profit or the recording of a loss that would be borne solely by us. Any inability to properly manage, estimate, and perform these
development and engineering services for our customers could cause us to incur unexpected losses and reduce or even eliminate any profit from these
arrangements, and in such a case our business would be harmed.
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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