TiVo 2013 Annual Report Download - page 25

Table of Contents
provide certain aspects of the TiVo service to our customers until we are able to incorporate an alternate source of guide data. While we have a
license to an alternative sources of guide data, we are not currently using it and there would be significant cost and delay involved in
integrating such an alternative source of guide data should we do so in the future. Depending upon the amount of notice we receive of such a
breach or rejection of our agreement, and the amount of development work required by us to incorporate an alternate source of guide data, we
may be subject to a period of time in which we are unable to provide the TiVo service to our customers and distribution partners. In such an
event, our business would be harmed.
If our arrangements with Broadcom or Tribune or with our third-party contract manufacturer were to terminate or expire without a
replacement arrangement in place, or if we or our manufacturers were unable to obtain sufficient quantities of these components or required
program guide data from our suppliers, our search for alternate suppliers could result in significant delays, added expense or disruption in
product or service availability.
We depend upon third-parties to provide supply chain services related to inventory management, order fulfillment, and direct
sales logistics. We rely on third-party vendors to provide cost-effective and efficient supply chain services. Among other activities, these
outsourced services relate to direct sales logistics, including order fulfillment, inventory management and warehousing, and distribution of
inventory to third-party retailers. If one or several of our third-party supply chain partners were to discontinue services for us, our ability to
fulfill direct sales orders and distribute inventory timely, cost effectively, or at all, would be hindered which could in turn harm our business.
We are dependent on our major retail partners for distribution of our products to consumers. We currently rely on our
relationships with major retail distributors including Best Buy, Amazon, and others for distribution of TiVo-enabled DVRs. We do not typically
enter into long-term volume commitments with our major retail distributors. If one or several of our major retail partners were to discontinue
selling our products, the volume of TiVo-enabled DVRs sold to consumers could decrease which could in turn harm our business.



We have contracted for the manufacture of certain TiVo-enabled DVRs with a contract manufacturer. We sell these units to retailers and
distributors, as well as through our own online sales channels. Product manufacturing is outside our core business and we face significant
risks if our contract manufacturer does not perform as expected. If we fail to effectively oversee the manufacturing process, including the work
performed by our contract manufacturer, we could suffer from product recalls, poorly performing product, and higher than anticipated warranty
costs.
In connection with our manufacturing operations, we maintain a finished goods inventory of the DVR units we produce throughout the
year. Due to the seasonality in our business and our long-lead time product development and manufacturing cycles, we need to make
forecasts of demand and commit significant resources towards manufacturing of our DVR units well in advance of our peak selling periods.
We also have risks with respect to changing hardware forecasts with our television service provider customers who may revise their
purchase forecasts lower after we have committed manufacturing resources to meeting such forecasts due to long-lead times and prior to the
time in which such television service provider forecasts become contractually binding. As such, we are subject to significant risks in
managing the inventory needs of our business during the year, including estimates of the appropriate mix of demand across our older and
newer DVR models. If we were to overestimate demand for our DVRs, we may end up with inventories that exceed currently forecasted
demand which would require us to record additional write-downs. Should actual market conditions differ from our estimates, our future
results of operations could be materially affected. In the future, we may be required to record additional write-downs of finished products and
materials on-hand and/or additional charges for excess purchase commitments as a result of future changes in our sales forecasts.

 .
On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, the SEC
adopted new requirements for companies that use certain minerals and metals, known as conflict minerals, in their products, whether or not
these products are manufactured by third-parties. These requirements will require companies to perform due diligence, disclose and report
whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these new
requirements could adversely affect the sourcing, availability, and pricing of minerals used in the manufacture of
24