TiVo 2009 Annual Report Download - page 81

Table of Contents
As of January 31, 2010, the Company held approximately $5.0 million of investments with an auction reset feature (auction-rate securities, or "ARS"),
with a fair value of $4.1 million that are classified as long-term assets. The Company has recorded an unrealized loss on these auction rate securities of
$888,000, as the estimated fair value of these ARS was $888,000 lower than their cost. The Company has no intent to sell and it is more-likely-than not that
the Company will not be required to sell these ARS prior to recovery. Further, the total unrealized loss is primarily due to a liquidity discount resulting from
the failed auctions. Therefore, the Company will continue to treat the decline in fair values as temporary and recorded the unrealized loss in accumulated other
comprehensive loss on the accompanying consolidated balance sheet as of January 31, 2010. The Company is exposed to credit risk on its investments to the
extent of the amount recorded on the consolidated balance sheet as of January 31, 2010.
The majority of the Company's customers are concentrated in the United States. The Company is subject to a minimal amount of credit risk related to
service revenue contracts as these are primarily obtained through credit card sales. The Company sells its TiVo-enabled DVRs to retailers under customary
credit terms and generally requires no collateral. No customer generated 10% or more of net revenues for the fiscal years ended January 31, 2010, 2009, and
2008. The Company's accounts receivable concentrations as of January 31, 2010, 2009 and 2008 were as follows:
As of January 31,
2010 2009 2008
DIRECTV 12% 18% 17%
Best Buy 17% 19% 18%
Seven/Hybrid TV 22% 7% 0%
Comcast 27% 25% 38%
Other customers 22% 31% 27%
Total accounts receivable 100% 100% 100%
The Company does not have a long-term written supply agreement with Broadcom, the sole supplier of the system controller for its DVR. In instances
where a supply agreement does not exist and suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or deliver its
products and services to its customers on time if at all.
The TiVo service is enabled through the use of a DVR manufactured for TiVo by a third-party contract manufacturer. The Company also relies on third
parties with whom it outsources supply-chain activities related to inventory warehousing, order fulfillment, distribution, and other direct sales logistics. The
Company cannot be sure that these parties will perform their obligations as expected or that any revenue, cost savings, or other benefits will be derived from
the efforts of these parties. If any of these parties breaches or terminates their agreement with TiVo or otherwise fails to perform their obligations in a timely
manner, the Company may be delayed or prevented from commercializing its products and services.
Recent Accounting Pronouncements
During the three months ended July 31, 2009, TiVo adopted a new accounting principle that requires a company to recognize the credit component of
an other-than-temporary impairment of a debt security in income and the non-credit component in accumulated other comprehensive income when the
company does not intend to sell the security and it is more-likely-than not the company will not be required to sell the security prior to recovery. This
principle also changes the threshold for determining when an other-than-temporary impairment has occurred with respect to intent and ability to hold until
recovery and requires additional disclosures. The adoption of this accounting principle did not have a material impact on its consolidated financial statements.
In October 2009, the FASB issued a new accounting standards update which provides guidance for arrangements with multiple deliverables.
Specifically, the new accounting standards update requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its
deliverables based on their relative selling prices. In addition, the new accounting standards update eliminates the use of the residual method of allocation and
requires the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables. In October
2009, the FASB also issued a new accounting standards update which changes revenue recognition for tangible products containing software and hardware
elements. Specifically, if certain requirements are met, revenue arrangements that contain tangible products with software elements that are essential to the
functionality of the products are scoped out of the existing software revenue recognition accounting guidance and will be accounted for under the multiple-
element arrangements revenue recognition guidance discussed above. Both standards will be effective for TiVo in the first quarter of fiscal year 2012. Early
adoption is permitted. The Company is currently evaluating the impact of the adoption of these accounting standards updates on its consolidated financial
statements.
77