10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended October 31, 2003.

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from                      to                     

Commission file number 000-27141

TIVO INC.

(Exact name of registrant as specified in its charter)

Delaware	77-0463167
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2160 Gold Street, PO Box 2160, Alviso, CA	95002
(Address of principal executive offices)	(Zip Code)

(408) 519-9100

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No ¨

The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 68,525,545 as of December 5, 2003.

TABLE OF CONTENTS

PART I : FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	5
	CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT	6
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	9
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	53
ITEM 4.	CONTROLS AND PROCEDURES	53
PART II : OTHER INFORMATION		53
ITEM 1.	LEGAL PROCEEDINGS	53
ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS	54
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	55
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	55
ITEM 5.	OTHER INFORMATION	55
ITEM 6.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K	56
SIGNATURES AND OFFICER CERTIFICATIONS		57

2

PART I : FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TIVO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(unaudited)

	October 31, 2003		January 31, 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	61,807	$	44,201
Accounts receivable, net of allowance for doubtful accounts of $62 and $8		18,722		5,839
Accounts receivable-related parties		1,138		1,271
Inventories		9,957		7,273
Prepaid expenses and other		2,905		2,376
Prepaid expenses and other-related parties		2,842		2,851
Total current assets		97,371		63,811
LONG-TERM ASSETS
Property and equipment, net		9,644		12,143
Prepaid expenses and other		979		1,392
Prepaid expenses and other-related parties		3,923		4,974
Total long-term assets		14,546		18,509
Total assets	$	111,917	$	82,320
LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES
CURRENT LIABILITIES
Line of credit	$	6,000	$	—
Accounts payable		21,319		15,260
Accrued liabilities		12,254		13,980
Accrued liabilities-related parties		1,603		3,359
Deferred revenue		30,416		24,000
Deferred revenue-related parties		1,321		6,077
Total current liabilities		72,913		62,676
LONG-TERM LIABILITIES
Convertible notes payable (face value $10,450)		5,574		4,265
Convertible notes payable-related parties (face value $10,000)		5,176		3,920
Deferred revenue		33,984		32,373
Deferred rent and other		2,879		3,783
Total long-term liabilities		47,613		44,341

The accompanying notes are an integral part of these statements.

3

TIVO INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands, except share amounts)

(unaudited)

	October 31, 2003			January 31, 2003
Total liabilities		120,526			107,017
COMMITMENTS AND CONTINGENCIES (see Note 6)
STOCKHOLDERS’ DEFICIT
Common stock, par value $0.001:
Authorized shares are 150,000,000
Issued and outstanding shares are 68,503,103 and 63,918,686, respectively		69			64
Additional paid-in capital		556,647			522,101
Deferred compensation		(436	)		—
Prepaid marketing expense		—			(1,003	)
Note receivable-related parties		—			(627	)
Accumulated deficit		(564,889	)		(545,232	)
Total stockholders’ deficit		(8,609	)		(24,697	)
Total liabilities and stockholders’ deficit	$	111,917		$	82,320

The accompanying notes are an integral part of these statements.

4

TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

	Three Months Ended October 31,						Nine Months Ended October 31,
	2003			2002			2003			2002
Revenues
Service and technology revenues (includes $7,345, $2,270, $15,735 and $18,244 of revenues-related parties for the three months and nine months ended October 31, 2003 and 2002, respectively)	$	22,674		$	12,741		$	56,148		$	46,455
Hardware revenues		24,479			16,220			47,345			31,109
Rebates, revenue share and other payments to channel (includes ($5), ($366), ($98) and ($366) of contra-revenues-related parties for the three months and nine months ended October 31, 2003 and 2002, respectively)		(3,897	)		(3,968	)		(5,045	)		(4,568	)
Net revenues		43,256			24,993			98,448			72,996
Costs of revenues
Costs of service and technology revenues		8,834			5,294			23,566			18,323
Cost of hardware revenues		25,413			15,588			48,149			30,599
Total costs of revenues		34,247			20,882			71,715			48,922
Gross margin		9,009			4,111			26,733			24,074
Research and development		5,432			4,875			16,693			14,395
Sales and marketing (includes $2,155, $2,283, $5,937 and $28,639 of sales and marketing-related parties for the three months and nine months ended October 31, 2003 and 2002, respectively)		5,704			4,333			14,205			44,152
General and administrative		3,949			3,752			11,788			11,100
Total operating expenses		15,085			12,960			42,686			69,647
Loss from operations		(6,076	)		(8,849	)		(15,953	)		(45,573	)
Interest income		133			89			363			4,334
Interest expense and other (includes $175, $319, $525 and $1,086 of interest expense-related parties for the three months and nine months ended October 31, 2003 and 2002, respectively)		(1,330	)		(2,609	)		(3,915	)		(6,566	)
Loss before income taxes		(7,273	)		(11,369	)		(19,505	)		(47,805	)
Provision for income taxes		(115	)		(150	)		(152	)		(261	)
Net loss		(7,388	)		(11,519	)		(19,657	)		(48,066	)
Less: Series A redeemable convertible preferred stock dividend		—			—			—			220
Less: Accretion to redemption value of Series A redeemable convertible preferred stock		—			—			—			1,445
Net loss attributable to common stockholders	$	(7,388	)	$	(11,519	)	$	(19,657	)	$	(49,731	)
Net loss per common share basic and diluted	$	(0.11	)	$	(0.23	)	$	(0.30	)	$	(1.02	)
Weighted average common shares outstanding - basic and diluted		68,226			51,041			66,027			48,793

The accompanying notes are an integral part of these statements.

5

TIVO INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(In thousands, except share amounts)

(unaudited)

	Common Stock			Additional Paid-In Capital		Deferred Compensation			Prepaid Marketing Expense			Note Receivable- Related Parties			Accumulated Deficit			Total
	Shares	Amount
BALANCE JANUARY 31, 2003	63,918,686	$	64	$	522,101	$	—		$	(1,003	)	$	(627	)	$	(545,232	)	$	(24,697	)
Issuance of common stock related to exercise of common stock options	235,918		—		617		—			—			—			—			617
Issuance of common stock related to employee stock purchase plan	188,106		—		820		—			—			—			—			820
Amortization of prepaid marketing expense	—		—		—		—			376			—			—			376
Amortization of note receivable	—		—		—		—			—			235			—			235
Net loss	—		—		—		—			—			—			(7,882	)		(7,882	)
BALANCE APRIL 30, 2003	64,342,710		64		523,538		—			(627	)		(392	)		(553,114	)		(30,531	)
Issuance of common stock for cash, net of issuance costs	2,875,000		3		26,120		—			—			—			—			26,123
Issuance of common stock related to exercise of common stock options	941,447		1		4,859		—			—			—			—			4,860
Issuance of compensatory restricted common stock grant	35,000		—		370		(370	)		—			—			—			—
Recognition of stock based compensation expense (amortization)	—		—		—		16			—			—			—			16
Amortization of prepaid marketing expense	—		—		—		—			376			—			—			376
Amortization of note receivable	—		—		—		—			—			235			—			235
Net loss	—		—		—		—			—			—			(4,387	)		(4,387	)
BALANCE JULY 31, 2003	68,194,157	$	68	$	554,887	$	(354	)	$	(251	)	$	(157	)	$	(557,501	)	$	(3,308	)
Deferred compensation recorded from issuance of stock options– total 58,000 shares	—		—		140		(140	)		—			—			—			—
Recognition of stock based compensation expense (amortization)	—		—		—		58			—			—			—			58
Issuance of common stock related to exercise of common stock options	136,768		—		706		—			—			—			—			706
Issuance of common stock related to employee stock purchase plan	172,178		1		914		—			—			—			—			915
Amortization of prepaid marketing expense	—		—		—		—			251			—			—			251
Amortization of note receivable	—		—		—		—			—			157			—			157
Net loss	—		—		—		—			—			—			(7,388	)		(7,388	)
BALANCE OCTOBER 31, 2003	68,503,103	$	69	$	556,647	$	(436	)	$	—		$	—		$	(564,889	)	$	(8,609	)

The accompanying notes are an integral part of these statements.

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TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Nine Months Ended October 31,
	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(19,657	)	$	(48,066	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,136			5,161
Amortization of prepaid marketing expense		—			1,189
Amortization of prepaid advertising –related parties		1,003			5,000
Non-cash interest expense		2,809			3,909
Amortization of prepaid marketing related to value of warrants		—			11,615
Recognition of stock-based compensation expense		74			203
Amortization of note receivable		627			706
Changes in assets and liabilities:
Accounts receivable, net		(12,883	)		(9,268	)
Accounts receivable-related parties		133			4,033
Inventories		(2,684	)		(5,068	)
Prepaid expenses and other		(773	)		(739	)
Prepaid expenses and other-related parties		9			114
Prepaid expenses and other, long-term		413			40
Prepaid expenses and other-related parties, long-term		1,051			(138	)
Accounts payable		6,059			12,904
Accrued liabilities		(1,726	)		3,044
Accrued liabilities-related parties		(1,756	)		(23,239	)
Deferred revenue		6,416			7,096
Deferred revenue-related parties		(4,756	)		(7,867	)
Long-term deferred revenue		1,611			4,282
Deferred rent and other long-term liabilities		(904	)		(528	)
Net cash used in operating activities		(20,798	)		(35,617	)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment		(1,637	)		(994	)
Net cash used in investing activities		(1,637	)		(994	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from issuance of common stock and warrants		26,623			25,000
Borrowing under bank line of credit		6,000			—
Payment of issuance costs for common stock and warrants		(500	)		(650	)
Proceeds from issuance of common stock related to employee stock purchase plan		1,735			1,275
Proceeds from issuance of common stock related to exercise of common stock options		6,183			168
Series A redeemable convertible preferred stock dividend		—			(220	)
Payment of issuance costs for common stock and warrants		—			(200	)
Net payments under capital lease obligations		—			(496	)
Net cash provided by (used in) financing activities		40,041			24,877

The accompanying notes are an integral part of these statements.

7

TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

(unaudited)

	Nine Months Ended October 31,
	2003			2002
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		17,606			(11,734	)
CASH AND CASH EQUIVALENTS:
Balance at beginning of period		44,201			52,327
Balance at end of period	$	61,807		$	40,593
SUPPLEMENTAL DISCLOSURE OF CASH AND NON-CASH FLOW INFORMATION
Cash paid for interest	$	(575	)	$	(1,996	)
Cash paid for interest-related parties		(525	)		(1,363	)
Reversal of deferred stock-based compensation		—			596
SUPPLEMENTAL DISCLOSURE OF RESTRICTED CASH AND OTHER NON-CASH INVESTING AND FINANCING INFORMATION
Issuance of compensatory common stock grant at $10.57 per share		(370	)		—
Deferred compensation recorded from issuance of stock options at option price of $5.00 which is less than FMV $7.41 per share at grant date – total 58,000 shares		(140	)		—
Beneficial conversion related to convertible notes payable as a result of conversion prices reset to $4.21		—			13,416
Beneficial conversion related to convertible notes payable as a result of conversion prices reset to $3.99		—			3,251
Issuance of common stock for payment of accrued liabilities		—			4,000
Interest income recognized on restricted cash		—			3,735
Accretion to redemption value of Series A redeemable convertible preferred stock		—			1,445
Redemption of shares of Series A convertible preferred stock using restricted cash		—			(48,000	)

The accompanying notes are an integral part of these statements.

8

TIVO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

The Company has developed a subscription-based television service (the “TiVo service”) that provides viewers with the ability to pause, rewind and play back live or recorded television broadcasts, as well as to search for, watch and record programs. The TiVo service provides television listings, daily suggestions and special viewing packages. The TiVo service also offers service providers, advertisers, content creators, and television networks a new platform for promotions, content delivery, and audience research. The TiVo service is enabled through a digital video recorder (the “DVR”) designed and developed by TiVo and manufactured by the Company or one of its third party manufacturers. The Company conducts its operations through one reportable segment.

The Company continues to be subject to certain risks, including the dependence on third parties for manufacturing, marketing and sales support; competition; the uncertainty of the market for personal television; dependence on key management; limited manufacturing, marketing and sales experience; and the uncertainty of future profitability and positive cash flow.

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited interim condensed consolidated financial statements do not contain all of the information and footnotes required by generally accepted accounting principles for complete audited annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of October 31, 2003 and January 31, 2003 and the results of operations for the three and nine-month periods ended October 31, 2003 and 2002 and condensed consolidated statements of cash flows for the nine-month periods ended October 31, 2003 and 2002. Additionally included is the unaudited statement of stockholders’ deficit for the nine-month period ended October 31, 2003. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of January 31, 2003 and 2002, including the notes thereto, included in the Company’s 2003 Annual Report on Form 10-K as amended. Operating results for the three and nine-month periods ended October 31, 2003 are not necessarily indicative of results that may be expected for the year ending January 31, 2004.

9

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its 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.

Reclassifications

Certain reclassifications have been made to prior periods’ financial statements to conform with the current period presentation.

Inventories

TiVo introduced its new 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 Series2 TiVo-enabled DVRs throughout the year. Inventories are stated at the lower of cost or market, with cost determined on the first-in, first-out method.

Revenue Recognition and Deferred Revenue

During the three and nine month periods ended October 31, 2003 and 2002 the Company generated service revenues from fees for providing the TiVo service to consumers. The Company also generated technology revenues from providing licensing and engineering professional services to other entities that were creating products that provide DVR functionality. In addition, in an effort to increase its subscription growth, the Company manufactured and distributed TiVo branded Series2 DVRs. This effort resulted in revenues from the sale of hardware products that enable the TiVo service.

Revenues for the three and nine months ended October 31, 2003 and 2002, respectively, were as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2003		2002		2003		2002
	(In thousands)
Revenues
Service Revenues	$	16,018	$	10,185	$	42,477	$	27,911
Technology Revenues		6,656		2,556		13,671		18,544
Hardware Revenues		24,479		16,220		47,345		31,109
Total Revenues	$	47,153	$	28,961	$	103,493	$	77,564

For the three months ended October 31, 2003 one customer generated $2.4 million of technology revenues and another customer generated $11.2 million of hardware revenues that accounted for 5% and 24% of total revenues, respectively. For the nine months ended October 31, 2003 a different customer generated $4.9 million of technology revenues and another customer generated $18.4 million of hardware revenues that accounted for 5% and 18% of total revenues, respectively. For the three and nine months ended October 31, 2002 one customer generated $828,000 and $12.6 million of technology revenues that accounted for 3% and 16%, respectively, of total revenues. Also for the three and nine months ended October 31, 2002, another customer generated $7.0 million and $16.8 million of hardware revenues that accounted for 24% and 22% of total revenues, respectively.

Service Revenues

Revenue from monthly and annual subscription fees to the TiVo service is recognized over the period benefited and is included in service revenues. TiVo offers a lifetime subscription option for the life of the DVR for a one-time, upfront payment. Subscription revenues from lifetime subscriptions are recognized ratably over a four-year period, the Company’s estimate of the useful life of the DVR. Additionally included in service revenues are revenues received from the sale of the Home Media Option, a premium feature package that allows customers to enjoy video, digital music and photos throughout their home.

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Technology Revenues

The Company recognizes technology revenue under technology license and engineering professional services agreements in accordance with the American Institute of Certified Public Accountant’s Statement of Position, 97-2, “Software Revenue Recognition”, as amended. These agreements contain multiple-element arrangements in which vendor specific objective evidence (“VSOE”) of fair value is required for all undelivered elements in order to recognize revenue related to the delivered element. Elements included in the Company’s arrangements may include technology licenses and associated maintenance and support, engineering professional services and other services. The timing of revenue recognition related to these transactions will depend, in part, on whether the Company can establish VSOE for undelivered elements and on how these transactions are structured. As such, revenue recognition may not correspond to the timing of related cash flows or the Company’s work effort.

In arrangements which include engineering professional services that are essential to the functionality of the software or involve significant customization or modification of the software, the Company recognizes revenue using the percentage-of-completion method, as described in SOP 81-1 “Accounting for Performance of Construction-Type and Certain Production-Type Contracts”, if the Company believes it is able to make reasonably dependable estimates of the extent of progress toward completion. The Company measures progress toward completion based on the ratio of costs incurred to date to total estimated costs of the project, an input method. The Company believes it is able to reasonably estimate, track and project the current progress and remaining effort to completion. If the Company is not able to estimate total project revenues or costs or progress toward completion but is able to estimate that no loss will be incurred on an arrangement, the Company recognizes revenue to the extent of incremental direct costs until the engineering professional services are complete. Thereafter, any remaining revenue is recognized over the period the maintenance and support or other services are provided.

Hardware Revenues

The Company recognizes hardware revenues from the sales of its Series2 TiVo-enabled DVRs. Hardware revenues are recognized upon shipment to consumers or upon delivery to retail customers. The fees for shipping and handling paid by customers are recognized as hardware revenues. The costs associated with shipping and handling these Series2 DVRs are expensed as cost of hardware revenues.

Rebates, Revenue Share and Other Payments to Channel

In connection with the Company’s adoption of Emerging Issues Task Force (EITF) 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)” on February 1, 2002, certain payments to customers are shown as a reduction to revenue rather than as a sales and marketing expense. These payments are classified as “rebates, revenue share and other payments to channel”.

Deferred Revenue

Deferred revenue consists of unrecognized service and technology fees that have been collected, however the related service has not yet been provided or VSOE of fair value does not exist for the undelivered elements of an arrangement.

Research and Development

Research and development expenses consist primarily of employee salaries and related expenses and consulting fees relating to the development of the TiVo service platform and products that enable the TiVo service. Research and development costs are expensed as incurred.

Interest Expense and Other

Interest expense and other consists of cash and non-cash charges related to interest expense paid to related parties and non-related parties. Included in interest expense are cash charges for coupon interest expense related to the convertible notes payable and cash charges for interest expense payable to Comdisco. Included in interest expense– related parties are

11

cash charges for coupon interest expense related to the convertible notes and cash charges for interest expense payable according to negotiated deferred payment schedules. Included in non-cash interest expense and other is amortization of discount on the convertible notes payable, debt issuance costs and warrants issued to Comdisco. The following table summarizes the components of interest expense and other:

	Three months ended October 31,				Nine months ended October 31,
	2003		2002		2003		2002
	(In thousands)
Cash interest expense	$	203	$	514	$	575	$	1,552
Cash interest expense – related parties		175		319		525		1,089
Total cash interest expense		378		833		1,100		2,641
Total non-cash interest expense and other		952		1,776		2,815		3,925
Total interest expense and other	$	1,330	$	2,609	$	3,915	$	6,566

Stock-Compensation

The Company has stock option plans and an Employee Stock Purchase Plan, under which officers, employees, consultants and non-employee directors may be granted options to purchase shares of the Company’s authorized but unissued or reacquired common stock, and may also be granted restricted stock and other stock awards. The Company’s stock option plans are accounted for under the intrinsic value recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. During the nine months ended October 31, 2003, all options granted under the stock option plans excluding the compensatory restricted common stock grant and 58,000 shares granted during the quarter ended October 31, 2003 were granted at exercise prices equal to the market price of the underlying common stock on the grant date. Therefore, no deferred stock-based employee compensation related to such options was recorded. In previous years the Company did issue certain stock options with exercise prices less than fair market value on the date of grant. The deferred compensation, which was valued using the intrinsic value method, was amortized over the four-year vesting period of these options.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure an Amendment of FASB Statement No. 123” (SFAS No. 148). SFAS No. 148 provides alternative methods of transition for companies making a voluntary change to fair value-based accounting for stock-based employee compensation. TiVo continues to account for its stock option plans under the intrinsic value recognition and measurement principles of APB Opinion No. 25, and related Interpretations. Effective for interim periods beginning after December 15, 2002, SFAS No. 148 also requires disclosure of pro-forma results on a quarterly basis as if the Company had applied the fair value recognition provisions of SFAS No. 123.

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The following table illustrates the effect on the Company’s net loss and basic and diluted loss per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, as amended, to options granted under the Company’s stock option plans and under the Company’s Employee Stock Purchase Plan for the three and nine months ended October 31, 2003 and 2002:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2003			2002			2003			2002
	(In thousands, except per share data)
Net loss attributable to common stockholders, as reported	$	(7,388	)	$	(11,519	)	$	(19,657	)	$	(49,731	)
Add back: stock based compensation expense recognized, net of related tax effects		58			96			74			203
Pro forma effect of stock based compensation expense determined under the fair value method for all awards, net of related tax effects		(3,685	)		(3,814	)		(10,777	)		(11,628	)
Net loss attributable to common stockholders, pro forma	$	(11,015	)	$	(15,237	)	$	(30,360	)	$	(61,156	)
Basic and diluted loss per share, as reported	$	(0.11	)	$	(0.23	)	$	(0.30	)	$	(1.02	)
Basic and diluted loss per share, pro forma	$	(0.16	)	$	(0.30	)	$	(0.46	)	$	(1.25	)

Net Loss Per Common Share

Net loss per common share is calculated in accordance with SFAS No. 128, “Earnings Per Share”. Under the provisions of SFAS No. 128, basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. The net loss attributable to common stockholders is calculated by deducting the Series A redeemable convertible preferred stock dividend and accretion to redemption value of Series A redeemable convertible preferred stock from the net loss. Shares used in the computation of net loss per common share amounts exclude options and warrants to purchase common stock and Series A convertible preferred stock, common shares issuable upon conversion of convertible notes payable, and any unvested, repurchasable common stock issued under the Company’s employee stock option plans.

Diluted net loss per common share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding. Diluted net loss per share does not include the effect of the following antidilutive potential common stock:

	Three Months Ended October 31,		Nine Months Ended October 31,
	2003	2002	2003	2002
	(number of shares)
Repurchasable common stock	551,037	527,550	551,037	527,550
Number of common shares issuable for convertible notes payable	5,125,313	11,090,226	5,125,313	11,090,226
Options to purchase common stock	13,045,274	11,822,356	13,045,274	11,822,356
Warrants to purchase common stock	5,800,209	5,780,209	5,800,209	5,780,209
Total	24,521,833	29,220,341	24,521,833	29,220,341

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Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, line of credit and accounts payable approximate fair value due to the short-term maturity of these instruments.

Because the Company’s convertible notes are not publicly traded, the Company estimates the fair value of its outstanding convertible notes by utilizing the value of the common stock that the notes are convertible into. As these convertible notes are deeply in the money, the Company estimates that the convertible notes can be valued using the fair value of the underlying stock.

As of October 31, 2003, the convertible notes payable long-term, face value of $10.5 million were convertible (using the conversion price then in effect of $3.99) into 2,619,047 shares of the Company’s common stock. The closing price of the Company’s common stock on October 31, 2003 was $8.06 as quoted on Nasdaq. If converted, the total fair value of these shares at the closing price would have been $21.1 million. The convertible notes payable-related parties long-term, face value of $10.0 million, were convertible (using the conversion price of $3.99 then in effect) into 2,506,265 shares of the Company’s common stock at October 31, 2003. If converted, the total fair value of these shares at the closing price would have been $20.2 million.

Business Concentrations and Credit Risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains cash with various financial institutions. The Company performs periodic evaluations of the relative credit standing of these institutions. 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 these customers as service revenue is primarily obtained through credit card sales. The allowance for doubtful accounts receivable at October 31, 2003 and January 31, 2003 was $62,000 and $8,000, respectively. The Company does not consider credit risk associated with accounts receivable—related parties (DIRECTV, Philips and Hughes) to be significant.

The Company is dependent on single suppliers for several key components and services. The Company does not have contracts or arrangements with such suppliers. Instead, the Company purchases these components and services by submitting purchase orders with these companies. The Company also has an agreement with Tribune Media Services, its sole supplier of programming guide data for the TiVo service. If these 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 or at all.

Recent Accounting Pronouncements

In November 2002, The Emerging Issues Task Force reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” or EITF 00-21. EITF 00-21 provides guidance on accounting for arrangements that involve the delivery of performance of multiple products, services and/or rights to use assets. EITF 00-21 applies to revenue arrangements entered into in fiscal periods beginning after June 15, 2003 and otherwise is effective the first quarter of fiscal 2004. The adoption of EITF 00-21 did not have a material effect on our financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” or SFAS 150. SFAS 150 establishes standards for the classification and measurement of three types of financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS 150 did not have a material impact on our financial position or results of operations.

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3. INDEMNIFICATION ARRANGEMENTS AND GUARANTEES

Product Warranties

In connection with the Company’s adoption of FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” the Company is including the following disclosure applicable to its product warranties. The Company is also including disclosures pertaining to the Company’s indemnification arrangements.

The Company accrues for warranty costs for the expected material and labor costs to provide warranty services. The methodology used in determining the liability for product warranty services is based upon historical information and experience. The Company’s warranty reserve is calculated as the total volume of unit sales multiplied by the expected volume of the warranty return rate multiplied by the estimated cost to replace or repair the customers’ warranty returns. The Company offers standard warranties for its DVRs consisting of 90 days free labor and one year parts exchange. During the nine months ended October 31, 2003 the warranty reserve was not material. The Company’s warranty accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Indemnification Arrangements

The Company undertakes indemnification obligations in its ordinary course of business in connection with, among other things, the licensing of its products, the provision of consulting services and the issuance of securities. Pursuant to these agreements, the Company may indemnify the other party for certain losses suffered or incurred by the indemnified party, generally its business partners or customers, underwriters or certain investors, in connection with various types of claims, which may include, without limitation, claims of intellectual property infringement, certain tax liabilities, negligence and intentional acts in the performance of services and violations of laws, including certain violations of securities laws. The term of these indemnification obligations is generally perpetual. The Company’s obligation to provide indemnification would arise in the event that a third party filed a claim against one of the parties that was covered by the Company’s indemnification obligation. As an example and not a limitation, if a third party sued a customer for intellectual property infringement and the Company agreed to indemnify that customer against such claims, its obligation would be triggered. For example, as the Company has disclosed in Note 6, it is currently indemnifying Sony against a claim of intellectual property infringement brought by Command Audio in connection with Sony’s manufacture and sale of TiVo devices.

The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to its indemnification obligations. A few of the variables affecting any such assessment include but are not limited to: the nature of the claim asserted, the relative merits of the claim, the financial ability of the party suing the indemnified party to engage in protracted litigation, the number of parties seeking indemnification, the nature and amount of damages claimed by the party suing the indemnified party and the willingness of such party to engage in settlement negotiations. Due to the nature of the Company’s potential indemnity liability, its indemnification obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary course of business.

Under certain circumstances, the Company may have recourse through its insurance policies that would enable it to recover from its insurance company some or all amounts paid pursuant to its indemnification obligations. The Company does not have any assets held either as collateral or by third parties that, upon the occurrence of an event requiring it to indemnify a customer, the Company could obtain and liquidate to recover all or a portion of the amounts paid pursuant to its indemnification obligations.

4. COMMON STOCK

On June 26, 2003, the Company announced a $27.3 million underwritten public offering of approximately 2.9 million shares of its common stock, par value $.001 per share, at a public offering price of $9.50 per share. The shares of common stock were registered pursuant to the Company’s universal shelf registration statement on Form S-3 (File No. 333-53152)

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under the Securities Act of 1933, as amended, as supplemented by a registration statement on Form S-3 (File No. 333-106507) filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended. The offering closed on July 1, 2003 with net proceeds of approximately $26.1 million after deducting cash offering expenses of approximately $500,000.

5. CONVERTIBLE NOTES PAYABLE

On August 28, 2001, the Company closed a private placement of $51.8 million in face value of convertible notes payable and warrants and received cash proceeds, net of issuance costs, of approximately $40.1 million from accredited investors.

During the nine months ended October 31, 2003 there were no conversions of notes payable. As of October 31, 2003 the carrying value of the convertible notes payable is as follows:

	Convertible notes payable			Convertible notes payable-related parties			Total
	(In thousands)
Face value of convertible notes payable	$	10,450		$	10,000		$	20,450
Unamortized discount resulting from warrants issued to noteholders		(1,189	)		(955	)		(2,144	)
Unamortized discount resulting from beneficial conversion feature		(3,687	)		(3,869	)		(7,556	)
Carrying value of convertible notes payable	$	5,574		$	5,176		$	10,750

• The net carrying values of the convertible notes payable and convertible notes payable – related parties were $5.6 million and $5.2 million respectively as of October 31, 2003. The convertible notes payable instruments are not publicly traded. As these convertible notes are deeply in the money, the Company estimates that the convertible notes can be valued using the fair value of the underlying stock. Therefore, the Company estimates the fair value of its outstanding convertible notes by utilizing the value of the common stock that the notes were convertible into. As of October 31, 2003, the convertible notes payable long-term, face value of $10.5 million were convertible (using the conversion price of $3.99 then in effect) into 2,619,047 shares of the Company’s common stock. The closing price of the Company’s common stock on October 31, 2003 was $8.06 as quoted on Nasdaq. If converted, the total fair value of these shares at the closing price would have been $21.1 million. The convertible notes payable-related parties long-term, face value of $10.0 million, were convertible (using the conversion price of $3.99 then in effect) into 2,506,265 shares of the Company’s common stock at October 31, 2003. If converted, the total fair value of these shares at the closing price would have been $20.2 million.

• Interest expense and other for the nine months ended October 31, 2003 includes 7% coupon interest expense of $549,000; amortization of the discount pertaining to the value of the warrants issued on convertible notes payable of $290,000; and amortization of the discount pertaining to the value of beneficial conversion of $1,019,000.

• Interest expense and other-related parties for the nine months ended October 31, 2003 includes 7% coupon interest of $525,000; amortization of the discount pertaining to the value of the warrants issued on convertible notes payable-related parties of $277,000; and amortization of the discount pertaining to the value of beneficial conversion of $979,000.

• Amortization of debt issuance expenses was $211,000 for the nine months ended October 31, 2003.

• Amortization of non-cash debt issuance expenses was $33,000 the nine months ended October 31, 2003.

• Amortization of the discount resulting from the issuance of warrants to noteholders on convertible notes payable and convertible notes payable-related parties was $567,000 for the nine months ended October 31, 2003.

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• Amortization of the discount pertaining to the value of the beneficial conversion of the convertible notes payable and convertible notes payable-related parties was $1,999,000 for the nine months ended October 31, 2003.

On August 15, 2003, the Company paid approximately $716,000 of coupon interest to holders of its 7% Convertible Senior Notes due August 15, 2006. The Company paid $350,000 to related party noteholders and $365,750 to non-related party noteholders.

Assuming there are no conversions, 7% coupon interest for the outstanding noteholders is paid semi-annually with the next payment of $350,000 for convertible notes payable – related parties and $366,000 for convertible notes payable scheduled to be paid on February 15, 2004.

6. COMMITMENTS AND CONTINGENCIES

Legal Matters

On June 12, 2001, a securities class action lawsuit in which the Company and certain of its officers and directors are named as defendants was filed in the United States District Court for the Southern District of New York. This action, which is captioned Wercberger v. TiVo et al., also names several of the underwriters involved in the Company’s initial public offering as defendants. This class action was brought on behalf of a purported class of purchasers of the Company’s common stock from September 30, 1999, the time of its initial public offering, through December 6, 2000. The central allegation in this action is that the underwriters in the initial public offering solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased TiVo common stock in the initial public offering and the after-market. The complaint also alleges that the TiVo defendants violated the federal securities laws by failing to disclose in the initial public offering prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. More than 150 issuers have been named in similar lawsuits. In July 2002, an omnibus motion to dismiss all complaints against issuers and individual defendants affiliated with issuers (including the TiVo defendants) was filed by the entire group of issuer defendants in these similar actions. On October 8, 2002, TiVo’s officers were dismissed as defendants in the lawsuit. On February 19, 2003, the court in this action issued its decision on defendants’ omnibus motion to dismiss. This decision dismissed the Section 10(b) claim as to TiVo but denied the motion to dismiss the Section 11 claim as to TiVo and virtually all of the other issuer-defendants.

On June 26, 2003, the plaintiffs announced a proposed settlement with the Company and the other issuer defendants. The proposed settlement provides that the insurers of all settling issuers will guarantee that the plaintiffs recover $1 billion from non-settling defendants, including the investment banks who acted as underwriters in those offerings. In the event that the plaintiffs do not recover $1 billion, the insurers for the settling issuers will make up the difference. Under the proposed settlement, the maximum amount that could be charged to the Company’s insurance policy in the event that the plaintiffs recovered nothing from the investment banks would be approximately $3.9 million. The Company believes that it has sufficient insurance coverage to cover the maximum amount that it may be responsible for under the proposed settlement. TiVo’s board of directors approved the proposed settlement at a meeting held on June 25, 2003. It is possible that the parties may not reach agreement on the final settlement documents or that the Federal District Court may not approve the settlement in whole or part. In the event that the parties do not reach agreement on the final settlement, the Company believes it has meritorious defenses and intends to defend this action vigorously; however, it could be forced to incur material expenses in the litigation, and in the event there is an adverse outcome, its business could be harmed.

On September 25, 2001, Pause Technology filed a complaint against TiVo in the U.S. District Court for the District of Massachusetts alleging willful and deliberate infringement of U.S. Reissue Patent No. 36,801, entitled “Time Delayed Digital Video System Using Concurrent Recording and Playback”. Pause Technology alleges that it is the owner of this patent, and further alleges that TiVo has willfully and deliberately infringed this patent by making, selling, offering to sell, and using within the United States the TiVo digital video recorder. Pause Technology seeks unspecified monetary damages as well as an injunction against TiVo’s operations. It also seeks attorneys’ fees and costs. The Company’s answer was filed

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on December 26, 2001. The Company is incurring expenses in connection with this litigation which may become material, and in the event there is an adverse outcome, its business could be harmed.

On February 5, 2002, Sony Corporation notified TiVo that Command Audio Corporation had filed a complaint against Sony Electronics, Inc. on February 2, 2002 in the U.S. District Court for the Northern District of California. The complaint alleges that, in connection with its sale of digital video recorders and other products, Sony infringes upon two patents owned by Command Audio (U.S. Patent Nos. 5,590,195 (“Information Dissemination Using Various Transmission Modes”) and 6,330,334 (“Method and System for Information Dissemination Using Television Signals”). The complaint seeks injunctive relief, compensatory and treble damages and Command Audio’s costs and expenses, including reasonable attorneys’ fees. The case is currently scheduled for trial in March 2004. Under the terms of the Company’s agreement with Sony governing the distribution of certain digital video recorders that enable the TiVo service, TiVo is required to indemnify Sony against any and all claims, damages, liabilities, costs and expenses relating to claims that its technology infringes upon intellectual property rights owned by third parties. The Company believes Sony has meritorious defenses against this lawsuit; however, due to its indemnification obligations, the Company is incurring expenses in connection with this litigation which may become material, and, if Sony were to lose this lawsuit, the Company’s business could be harmed.

The Company is involved in numerous lawsuits in the ordinary course of its business. The Company assesses potential liabilities in connection with these lawsuits under Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies.” The Company accrues an estimated loss for these loss contingencies if both of the following conditions are met: information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. As of October 31, 2003, the Company has not accrued a liability for any of the lawsuits filed against it as the conditions for accrual have not been met.

Facilities Leases

In October 1999, the Company entered into an office lease with WIX/NSJ Real Estate Limited Partnership for its headquarters. The lease began on March 10, 2000 and has a seven-year term. Monthly rent is approximately $236,000 with built-in base rent escalations periodically throughout the lease term. The lease is classified as an operating lease. Rent expense is recognized using the straight-line method over the lease term. Additionally, the Company delivered a letter of credit totaling $476,683, to WIX/NSJ Real Estate Limited Partnership as collateral for performance by the Company of all of its obligations under the lease. The letter of credit is to remain in effect the entire term of the lease.

The Company’s corporate headquarters consists of two buildings, which are used for administrative, sales and marketing, customer service and product development activities, and are located in Alviso, California. One of the buildings was vacant during most of the fiscal year ended January 31, 2003. The Company had subleased a portion of the idle space through August 2002. The Company reoccupied one floor of the vacant building during the three months ended April 30, 2003 but does not intend to occupy the second floor for the remaining term of the lease. The Company is actively searching for tenants to sublease the idle space; however given the current real estate market conditions, the Company does not expect to sublease these facilities.

Additionally, the Company leases office space in Berkshire, United Kingdom under an operating lease that expires in March 2006. The Company abandoned this facility in May 2002. TiVo is actively searching for tenants to sublease the office; however given the current real estate market conditions, the Company does not expect to sublease these facilities.

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The following table summarizes the accrued facilities expenses recorded as a result of the Company’s partially unoccupied facilities as of October 31, 2003:

	Accrual balance at January 31, 2003		Total cash payments for the nine months ended October 31, 2003			Accrual balance at October 31, 2003
	(In thousands)
TiVo, Alviso, CA facility lease expenses	$	3,640	$	(773	)	$	2,867
TiVo, Berkshire, United Kingdom facility lease expenses		367		(84	)		283
Total	$	4,007	$	(857	)	$	3,150

Of the total accrued facilities expenses recorded as a result of the Company’s partially unoccupied facilities, $2.2 million is included in deferred rent and other long-term liabilities and $991,000 is included in accrued liabilities in the accompanying condensed consolidated balance sheet at October 31, 2003.

Future minimum operating lease payments as of October 31, 2003, are as follows:

Fiscal Year Ending	Facilities Leases
	(In thousands)
January 31, 2004	$	789
January 31, 2005		3,188
January 31, 2006		3,271
January 31, 2007		3,288
January 31, 2007		273
Total	$	10,809

7. SILICON VALLEY BANK LINE OF CREDIT

On July 17, 2003, the Company entered into a loan and security agreement with Silicon Valley Bank, whereby Silicon Valley Bank agreed to extend to it a revolving line of credit of up to the lesser of $6 million or a borrowing base. The borrowing base is equal to the sum of 80% of eligible accounts receivable plus 100% of pledged certificates of deposit (up to $2 million). The line of credit is secured by a first priority security interest on all of the Company’s assets except for its intellectual property. The Company is required to maintain at least $2 million in pledged certificates of deposit with Silicon Valley Bank during the term of the line of credit. The line of credit bears interest at the greater of prime plus 0.75% or 5.00% per annum, but in an event of default, the interest rate becomes 3.00% above the rate effective immediately before the event of default. The loan and security agreement includes, among other terms and conditions, limitations on the Company’s ability to dispose of its assets; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness (other than certain types of permitted indebtedness, including existing and subordinated debt and debt to trade creditors incurred in the ordinary course of business); create, incur or allow any lien on any of its property or assign any right to receive income except for certain permitted liens; make investments; pay dividends; or make distributions; and contains a requirement that the Company maintains certain financial ratios. At October 31, 2003 the Company was in compliance with these covenants. The line of credit terminates and any and all borrowings are due on June 30, 2004, but it may be terminated earlier by the Company without penalty upon written notice and prompt repayment of all amounts borrowed. At October 31, 2003 there was $6.0 million in borrowings outstanding on the line of credit with an interest rate of 5.07%.

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8. DIRECTV AMENDMENTS

During the quarter ended October 31, 2003, the Company entered into the following two agreements with DIRECTV: The Second Consolidated Amendment to Marketing Agreement, dated as of June 30, 2003 and Amendment No. 1 to the Services Agreement, dated as of October 3, 2003. Both amendments revise provisions relating to, among other things, the amount, timing and duration of revenue share payments made by the Company to DIRECTV for each subscription from integrated DIRECTV satellite receivers with TiVo service.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

TiVo is a leading provider of television services for digital video recorders, or DVRs, a rapidly growing consumer electronics category. Our subscription-based TiVo service provides consumers with an easy way to record, watch, and control television. The TiVo service also offers service providers, advertisers, content creators and television networks a new platform for promotions, content delivery and audience research. As of October 31, 2003, we had over 1 million subscriptions to the TiVo service.

We currently derive revenues from three sources:

• TiVo service revenues. Consumers subscribe directly to the TiVo service, paying us either $12.95 monthly or a one-time “product lifetime” fee of $299. In addition, DIRECTV pays fees in order to offer the TiVo service to its 12 million satellite TV subscribers. Finally, service revenues also include fees for premium services, audience research, advertising and promotions. For the nine months ended October 31, 2003, service revenues were 41% of our total revenues, or $42.5 million.

• Technology revenues. We hold an extensive portfolio of patents that enables us to offer DVR software, hardware and service solutions to customers like SONY, Toshiba, Pioneer and DIRECTV. In the nine months ended October 31, 2003, we derived 13% of our revenues, or $13.7 million, from licensing and engineering professional services.

• DVR hardware revenues. We engage a contract manufacturer to build TiVo Series2 DVRs, which we sell directly to consumers and retailers such as Best Buy and Circuit City. We distribute these DVRs solely to enable our service revenues and, as a result, do not intend to generate significant gross profits from hardware. We do not recognize hardware revenues related to the sale of TiVo-enabled DVRs built and distributed by other manufacturers such as Toshiba, Sony, Hughes, Philips, Samsung and Pioneer. In the nine months ended October 31, 2003, we derived 46% of our revenues, or $47.3 million, from hardware sales.

TiVo was incorporated in August 1997 as a Delaware corporation and is located in Alviso, California. In August of 2000, we formed a wholly owned subsidiary, TiVo (UK) Ltd., in the United Kingdom. In October of 2001, we formed a subsidiary, TiVo International, Inc., a Delaware corporation. We conduct our operations through one reportable segment.

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We continue to be subject to a number of risks, including the dependence on third parties for manufacturing, marketing and sales support; the uncertainty of the market for digital video recorders; dependence on key management; limited manufacturing, marketing and sales experience; and the uncertainty of future profitability and positive cash flow. Additionally, we operate in an emerging industry and face significant competition. Our success is dependent upon the market’s acceptance of the TiVo service and the DVRs that enable the TiVo service. To date, we have recognized limited revenue, have incurred significant losses and have had substantial negative cash flow. During the nine months ended October 31, 2003, we had net losses of $19.7 million. As of October 31, 2003, we had an accumulated deficit of $564.9 million. We believe that our cash and cash equivalents, together with funds generated from operations, will be sufficient to fund our operations, capital expenditures and working capital needs through the next twelve months.

Sources of Revenues

Our revenues for the three and nine months ended October 31, 2003 and 2002, respectively, as a percentage of total revenues were as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2003		2002		2003		2002
Revenues
Service Revenues	34	%	35	%	41	%	36	%
Technology Revenues	14	%	9	%	13	%	24	%
Hardware Revenues	52	%	56	%	46	%	40	%

Revenues from advertising and research services included in service revenues were not material during these periods. For the three months ended October 31, 2003 one customer generated $2.4 million of technology revenues and another customer generated $11.2 million of hardware revenues that accounted for 5% and 24% of total revenues, respectively. For the nine months ended October 31, 2003 a different customer generated $4.9 million of technology revenues and another customer generated $18.4 million of hardware revenues that accounted for 5% and 18% of total revenues, respectively. Of the total service revenues and technology revenues for the three and nine months ended October 31, 2003, $7.3 million and $15.7 million, respectively, were generated from related parties.

For the three and nine months ended October 31, 2002 one customer generated $828,000 and $12.6 million of technology revenues that accounted for 3% and 16%, respectively, of total revenues. Also for the three and nine months ended October 31, 2002, another customer generated $7.0 million and $16.8 million of hardware revenues that accounted for 24% and 22% of total revenues, respectively. For the three and nine months ended October 31, 2002, $2.3 million and $18.2 million of the technology revenues were generated from related parties.

Our relationship with DIRECTV generates service revenues from two different sources. First, DIRECTV pays us recurring per household fees for access to the technology that enables it to deliver TiVo services to its customers. These fees vary depending on the acquisition and service costs TiVo incurs. Because DIRECTV owes these fees on a per household basis, we receive only one fee from DIRECTV for those households with more than one DIRECTV DVR with TiVo subscription. Second, we continue to recognize revenue from those DIRECTV customers who purchased the product lifetime subscription option when it was available.

The total recognized service revenue from these two sources for the month of October was an average of approximately $2.00 per Service Provider Subscription. We expect this average to decline in the future as a) the mix of DIRECTV subscriptions shifts to those for which we incur lower costs and for which DIRECTV pays us a lower fee and b) subscription revenue on product lifetime subscriptions reaches the end of its four-year recognition period.

Marketing the TiVo service

We market the TiVo service in two ways. First, we sell directly to consumers who have purchased a TiVo-enabled DVR. We sell the TiVo service for either a monthly subscription rate of $12.95, or for a single payment of $299 for the lifetime of the DVR.

Second, we market our service through our relationship with DIRECTV. DIRECTV pays us a per-household monthly fee for the ability to offer our service to their customers. DIRECTV makes all pricing decisions regarding the service it sells to its own customer base. In order to receive DIRECTV or other satellite or cable service, the consumer must purchase the subscription television service from that provider.

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Subscription Growth

Below is a table that details the growth in the subscription base during the past eight quarters. The TiVo service Subscriptions lines refer to standalone TiVo DVRs and products with the TiVo Basic service that have upgraded to the TiVo service, including those manufactured by TiVo, Sony, Pioneer, Toshiba, Philips and others. The Service Provider Subscriptions line items refer to subscriptions from integrated DIRECTV satellite receivers with TiVo. Additionally, we provide a breakdown of the percent of TiVo service Subscriptions (excluding integrated DIRECTV DVRs) for which we are paid a recurring monthly or annual fee. For households with multiple DVRs, we count each DVR as a subscription. A “subscription” is a DVR or product for which (i) a customer has paid for the TiVo service and (ii) service is not canceled. DVRs with the TiVo Basic service that do not upgrade to the TiVo service are not included in our subscription totals.

	Three Months Ended
(Subscriptions in thousands)	Jan 31, 2002		Apr 30, 2002		Jul 31, 2002		Oct 31, 2002		Jan 31, 2003		Apr 30, 2003		Jul 31, 2003		Oct 31, 2003
TiVo Service Subscriptions Net Additions	40		24		21		30		75		37		34		59
Service Provider Subscriptions Net Additions	60		18		21		16		39		42		56		150
Total Subscriptions Net Additions	100		42		42		46		114		79		90		209
TiVo Service Cumulative Subscriptions	246		270		291		321		396		433		467		526
Service Provider Cumulative Subscriptions	134		152		173		189		228		270		326		476
Total Cumulative Subscriptions	380		422		464		510		624		703		793		1,002
% of TiVo Service Cumulative Subscriptions paying recurring fees	41	%	34	%	33	%	30	%	34	%	34	%	34	%	35	%

During the three months ended October 31, 2003, we activated approximately 209,000 net new subscriptions to the TiVo service, bringing the total installed subscription base to over one million as of October 31, 2003, approximately 96% greater than the installed base as of October 31, 2002. TiVo added approximately 59,000 net new TiVo Service subscriptions in the quarter, nearly double the growth for the three months ended October 31, 2002. Consumer demand for TiVo Series2 DVR and DVD products was driven by broad availability and strong support in the retail channel, a $50 rebate program that began in September 2003, and increased consumer awareness of TiVo. We intend to generate continued TiVo service subscription growth through managing our relationships with leading retailers like Best Buy, Circuit City and others. These relationships increase the supply of TiVo-enabled DVRs and provide marketing and distribution support, allowing us to increase subscriptions.

TiVo added approximately 150,000 net new subscriptions through DIRECTV during the three months ended October 31, 2003, which is growth of nearly 10 times the number of new DIRECTV subscriptions added in the quarter ending October 31, 2002. DIRECTV has increased its focus in driving demand for DIRECTV with TiVo, including increased marketing investment directed at existing DIRECTV customers.

We intend to continue to generate significant subscription growth through relationships similar to our agreements with DIRECTV and our agreements with consumer electronics manufacturers such as Sony, Pioneer, Toshiba and others pursuant to which these third parties manufacture, market and distribute TiVo-enabled platforms through their own distribution and marketing networks. We intend to continue to invest limited amounts in general sales and marketing expenditures to support subscription growth.

In May 2003, we announced a new introductory service level called TiVo Basic. TiVo Basic service offers consumers limited DVR functionality such as pausing live TV, recording from a guide with 3 days of program guide data and manual repeat recording by time and date. TiVo Basic service does not include a number of popular TiVo service features, such as Season Pass^™, WishList^™ and Search by Title or premium services such as Home Media Option. Products shipped with TiVo Basic can be upgraded to the full TiVo service at any time. The first products from our licensees to include the TiVo

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Basic service are available in retail stores for the 2003 holiday shopping season. TiVo Basic also includes a 45-day free trial of the TiVo service.

Critical Accounting Estimates

Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles as described in Note 1. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe our most critical accounting estimates are those described below and in our 2003 Annual Report on Form 10-K, as amended, beginning on page 27. For a detailed discussion on the application of these and other accounting estimates, see Item I. Note 2. “Summary of Significant Accounting Policies” in the notes to our condensed consolidated financial statements.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, collectibility is reasonably assured, and we have received customer acceptance, or are otherwise released from our service obligation or customer acceptance obligations.

Lifetime Subscriptions

TiVo offers a lifetime subscription option for the life of the DVR for a one-time, upfront payment. Subscription revenues from lifetime subscriptions are recognized ratably over a four-year period, the estimate of the useful life of the digital video recorder. If the useful life of the recorder was shorter or longer than the estimated four-year period, revenues would be recognized earlier or later, respectively, than our current policy. Additionally, if the lifetime subscriptions use the DVR for longer than anticipated, we will incur cost without a corresponding revenue stream and therefore will be required to fund ongoing cost of service for other sources. Our product is still relatively new and as more user information is gathered, this estimated life could be revised.

Engineering Professional Services

Technology revenues for engineering professional services that are essential to the functionality of the software or involve significant customization or modification, are generally recognized using the percentage-of-completion method, as described in SOP 81-1 “Accounting for Performance of Construction-Type and Certain Production-Type Contracts”, since we believe we are able to make reasonably dependable estimates of the extent of progress toward completion. We measure progress toward completion based on the ratio of costs incurred to total estimated costs, an input method. We believe we are able to reasonably estimate, track progess and project the remaining effort to completion. Had different cost estimates been used, or different methods of measuring progress to completion, our revenues and expenses during the period may have been materially different.

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Complex Agreements

We have a number of related party transactions and commitments. Many of these transactions are complex and involve multiple elements and types of consideration, including cash, debt, equity, and services. For example, our relationship with DIRECTV has historically included subscription revenue share expense, engineering professional services revenue, common stock and warrants issued for services and various platform subsidies. Many of our arrangements require us to make estimations for the valuation of non-cash expenses, such as warrants issued for services, which must be assigned a value using financial models that require us to estimate certain parameters. We have utilized our best estimate of the value of the various elements in accounting for these transactions. Had alternative assumptions been used, the values obtained may have been materially different.

Software Licenses

We recognize revenue under technology license and engineering professional services agreements in accordance with the American Institute of Certified Public Accountant’s Statement of Position, 97-2, “Software Revenue Recognition”, as amended. These agreements contain multiple-element arrangements in which vendor specific objective evidence of fair value is required for all undelivered elements in order to recognize license revenue. We may enter into additional technology licensing transactions, and the timing of revenue recognition related to these transactions will depend, in part, on whether we can establish vendor specific objective evidence for undelivered elements and on how these transactions are structured. As such, revenue recognition may not correspond to the timing of related cash flows or our work effort.

We also recognize revenue in accordance with SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” in connection with arrangements consisting of technology software licenses, engineering professional services, TiVo Basic service and maintenance for the term of the contract. Contract accounting is applied to these arrangements due to significant customization of the software in the form of engineering professional services. There is no objective fair value of the basic DVR service or the maintenance since maintenance is included in the term of the contract with no quoted renewal rates or is mandatory in order to continue to manufacture the product. However we can estimate that no loss will be incurred under these contracts. Therefore, we apply contract accounting by recognizing revenue to the extent of contract costs until the engineering customization services are complete. In accordance with SOP 81-1 paragraph 25(c), we use a zero estimate of profit because “estimating the final outcome may be impractical except to assure that no loss will be incurred.” The remainder of the revenue and any profit will be recognized on a straight-line basis over the period that the maintenance and basic DVR service, if applicable, are delivered. Amounts received prior to the recognition of revenue will be deferred. To date we have agreements with these arrangements with Toshiba Corporation, Toshiba Semiconductor and Pioneer Corporation.

Consumer Rebates

In accordance with Emerging Issues Task Force (EITF) 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)”, we recorded an estimated potential liability for our consumer rebate program that is consistent with rebate rates experienced by us in similar rebate programs. The consumer rebates are recognized as “rebates, revenue share and other payments to channel” in our condensed consolidated financial statements.

Stock Based Compensation

We have a history of issuing stock options to employees and directors as an integral part of our compensation programs. Generally accepted accounting principles allow alternative methods of accounting for these plans. We have chosen to account for our stock option plans under APB Opinion No. 25, “Accounting for Stock Issued to Employees”, which requires that only the intrinsic value of stock option grants be recognized as an expense on our condensed consolidated statement of operations. Accordingly, no compensation expense related to the time value of stock options is included in determining net loss and net loss per share in our condensed consolidated financial statements. The alternative method of accounting for stock options is prescribed by Statement of Financial Accounting Standards No. 123, and requires that both the intrinsic value and time value of options be recognized as an expense for employee stock option awards.

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SFAS No. 123 requires the use of option pricing models that were not developed for use in valuing employee stock options. Had we used SFAS No. 123 to value our employee stock option awards, our net loss and net loss per share would have been greater for all periods presented. The Black-Scholes option-pricing model was developed for use in estimating the fair value of short-lived exchange traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of employee stock options.

We also have issued warrants to non-employees for consulting services. We have used Black-Scholes option-pricing model to calculate the estimated fair market value of these warrants. Several assumptions are made in the model such as the term, volatility and risk-free rate of return.

Contingent Liabilities

TiVo is involved in numerous lawsuits in the ordinary course of its business. We assess potential liabilities in connection with these lawsuits under Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies.” We accrue an estimated loss for these loss contingencies if both of the following conditions are met: information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. As of October 31, 2003, we have not accrued a liability for any of the lawsuits filed against us as the conditions for accrual have not been met.

Valuation Allowance Against Deferred Tax Assets

We provided a valuation allowance of $211.0 million against our entire net deferred tax asset balance, primarily consisting of net operating loss carryforwards as of January 31, 2003. The valuation allowance was recorded given the losses we incurred through January 31, 2003 and our uncertainties regarding future operating profitability and taxable income. If we do not achieve profitability, we will not fully realize the deferred tax benefits.

Results of Operations

Service Revenues. Service revenues consist of fees from consumer subscriptions, premium services, advertising, service providers and others. Service revenues for the three and nine month periods ended October 31, 2003 were $16.0 million and $42.5 million, a 57% and 52% increase, respectively, from the related prior year periods; and is primarily due to the growth in our subscription base. For example, during the three months ended October 31, 2003 we activated four and half times the number of subscriptions as we did in the same time last year. The majority of subscription growth was a result of increased DIRECTV subscriptions that added approximately 150,000 net additional subscriptions during the quarter ended October 31, 2003. Other service revenues include advertising revenue from consumer companies and media networks that have provided content on the TiVo service and from our audience measurement research customers. Revenues from advertising and research services included in service revenues although increasing were not material during these periods.

Technology Revenues. Technology revenues consist of licensing and engineering professional services fees paid by consumer electronics companies and service providers. Technology revenues for the three months ended October 31, 2003 were $6.7 million or over two and half times greater than the three months ended October 31, 2002. Technology revenues for the nine months ended October 31, 2003 were $13.7 million or a decrease of 26% from the same period last year. For the three months ended October 31, 2003 we recognized $2.9 million of licensing and engineering professional services revenue with no corresponding costs from two customers due to the one-time recognition of revenues for two projects. We completed the requirements and have no further obligations under these agreements. Because we recognize technology revenues as we complete obligations under agreements, we have experienced and are likely to continue to experience an uneven pattern of quarterly revenue and revenue growth.

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to recognize revenue from technology licenses and engineering professional services agreements in the fiscal year ending January 31, 2004.

Hardware Revenues. Hardware revenues consist of fees received for the sale of DVRs both directly to consumers and to leading retailers. Hardware revenues for the three months ended October 31, 2003 were $24.5 million, a 51% increase as compared to prior year period. Similarly, hardware revenues for the nine months ended October 31, 2003 were $47.3 million, 52% greater then the prior year period due to increased volume of DVRs sold to retailers and consumers in fiscal year 2004. While hardware revenues are primarily driven by demand from consumers and retailers, the timing of sales to the channel as retailers increase their seasonal inventories also contributes to quarterly hardware revenues.

Rebates, revenue share and other payments to channel. In accordance with EITF 01-09, the revenue share and subsidy payments made to customers are presumed to be a reduction of the selling prices of our products or services and, therefore, are characterized as a reduction of revenues when recognized on our statement of operations. Rebates, revenue share and other payments to channel decreased for the three months ended October 31, 2003 as compared to the respective prior year period. The largest component of this decrease was related party subsidy expense which decreased by $366,000 due to lower manufacturing volume during the three months ended October 31, 2003. For the nine month period ended October 31, 2003 the payments increased compared to the prior year period due to additional revenue share and market development funds paid to retailers.

Cost of service and technology revenues. Costs of service and technology revenues consist primarily of expenses related to providing engineering professional services to our customers, including employee salaries and related costs, as well as prototyping and other material costs. Additional expenses included are telecommunication and network expenses, employee salaries, call center and other expenses related to providing the TiVo service. Expenses associated with engineering professional services were $4.5 million and $11.1 million for the three and nine months ended October 31, 2003 compared to $1.4 and $5.9 million for the three and nine months ended October 31, 2002. For the three and nine months ended October 31, 2003, telecommunications and network expense decreased respectively by 1% and 35% from the related prior year periods. This decrease was a result of continued reduction of the service cost per subscription including using satellite transmission of the TiVo service for subscriptions using the DIRECTV Receiver with TiVo. We expect to continue to control spending in our broadcast and customer service operations, resulting in further reductions in our per subscription cost of revenue.

Cost of hardware revenues. Costs of hardware revenues include all product costs and direct costs associated with the Series2 platforms, including manufacturing-related overhead and personnel expenses, warranty expenses, certain licensing expenses, and order fulfillment expenses such as shipping costs. Cost of hardware revenues are driven by a variety of factors related to inventory and channel management. For the three and nine months ended October 31, 2003, cost of hardware revenues of $25.4 million and $48.1 million, increased 63% and 57%, respectively, as compared to the respective prior periods. Cost of hardware revenues for the three and nine months ended October 31, 2003 were higher than the corresponding year periods due to higher volume of manufactured DVRs and related licensing expenses of approximately $640,000 for both periods in fiscal year 2004. We expect the costs per unit to reduce over time as the cost of manufacturing the DVRs decreases.

Research and development expenses. Our research and development expenses consist primarily of employee salaries and related expenses and consulting fees. Research and development expenses for the three and nine months ended October 31, 2003 were $5.4 million and $16.7 million, 11% and 16% higher respectively than the year ago periods due to increased salary expenses related to an increase in engineering headcount of 11 and 35 employees, respectively. As a percentage of net revenues, research and development expenses were 13% and 17% for three and nine months ended October 31, 2003, respectively.

Sales and marketing expenses. Sales and marketing expenses consist primarily of employee salaries and related expenses, media advertising, public relations activities, special promotions, trade shows and the production of product related items, including collateral and videos. Sales and marketing expenses for the three and nine months ended October 31, 2003 were $3.5 million and $8.3 million, 73% higher and 47% lower respectively than sales and marketing expenses for the corresponding fiscal year 2003 periods. Sales and marketing expenses as a percentage of net revenues for the three and nine

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months ended October 31, 2003 were 8% and 8% respectively. The largest component of the three-month increase was programming production video expenses that increased by approximately $930,000 as compared to the corresponding year period. The largest contributor to the nine-month reduction of sales and marketing expenses was non-related party subsidy expense that decreased $3.8 million from the year ago period. This marketing commitment ended prior to the three months ended April 30, 2003. Additionally, for the nine months ended October 31, 2003 as compared to the prior year, partner co-marketing and advertising expenses decreased by $2.3 million and $398,000, respectively, due to decreased activity.

Sales and marketing—related parties expenses consists of cash and non-cash charges related primarily to agreements with parties that held stock in us. Sales and marketing—related parties expenses for the three and nine months ended October 31, 2003 were $2.2 million and $5.9 million, 6% and 79% lower than sales and marketing—related parties expenses in the corresponding fiscal year 2003 periods. Sales and marketing—related parties expenses for the three and nine months ended October 31, 2003, consisted of cash charges of $1.7 million and $4.3 million and non-cash charges of $408,000 and $1.6 million, respectively. Sales and marketing—related parties expenses for the same periods in the prior fiscal year consisted of cash charges of $1.6 million and $15.1 million and non-cash charges of $611,000 and $13.5 million, respectively.

The cash portion of sales and marketing—related parties expenses was comprised of revenue share and manufacturing subsidy payments to Philips, Sony, Maxtor, formerly known as Quantum, and DIRECTV. Also included were media insertion orders paid to NBC. During the nine months ended October 31, 2003 revenue share and subsidy expense decreased by 36% and 83%, or $2.0 million and $3.8 million, respectively, compared to the corresponding fiscal year 2003 period. These decreases are a result of renegotiated contracts with DIRECTV and lower manufacturing volumes by related party consumer electronic manufacturers. Revenue share is calculated as an agreed upon percentage of revenue for a specified group of TiVo subscriptions. The non-cash portion is related to the amortization of prepaid marketing expense related to warrants or common stock issued for services to AOL and DIRECTV. We amortize the prepaid marketing expense on a straight-line basis over the period that the services are provided. Approximately 41% of the total sales and marketing—related parties expense for the nine months ended October 31, 2002, or $11.6 million, was non-cash expense related to the amortization of the prepaid marketing expense from the June 2000 Investment Agreement with AOL, which was terminated in April 2002.

General and administrative expenses. General and administrative expenses consist primarily of employee salaries and related expenses for executive, administrative, accounting, information systems, customer operations personnel, facility costs and professional fees. General and administrative expenses for the three and nine months ended October 31, 2003 were $3.9 million and $11.8 million, 5% and 6% increases respectively from the prior year periods primarily due to increased legal expenses of $2.4 million for ongoing and settled lawsuits. As a percentage of net revenues, general and administrative expenses were 9% and 12% for the three and nine months ended October 31, 2003.

Interest income. Interest income resulting from cash and cash equivalents held in interest bearing accounts for the three and nine months ended October 31, 2003 increased by $44,000 and decreased by $4.0 million, respectively. The three-month increase was a result of interest income earned on larger cash balances during the three months ended October 31, 2003. The nine-month decrease was a result of a receipt of a one time payment of $3.9 million in interest earned on the restricted cash from the agreement with AOL that was released from the escrow account to us in April 2002.

Interest expense and other. As shown in the following table, interest expense and other for the three and nine months ended October 31, 2003 includes coupon interest expense of $203,000 and $575,000, respectively, related to the convertible notes. Additionally $947,000 and $2.8 million for the same periods are attributable to the amortization of debt discount and issuance costs related to the convertible notes. Of the total interest expense and other, $175,000 and $525,000 were related to interest expense – related parties for the three and nine months ended October 31, 2003 for the coupon interest expense on the convertible notes. For the three and nine months ended October 31, 2002, interest expense and other was $2.6 million and $6.6 million respectively. This includes the coupon interest expense of $512,000 and $1.5 million on the convertible notes and the amortization of the value assigned to the Comdisco warrant for interest expense of $2,000 and $15,000, for the three and nine months ended October 31, 2002, respectively. Additionally, $1.8 million and $3.9 million was attributable to the amortization of interest expense related to the debt issuance costs for the convertible notes for the three and

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nine months ended October 31, 2002, respectively. Of the total interest expense and other, $319,000 and $1.1 million was related to interest expense – related parties for the three and nine months ended October 31, 2002. This includes $54,000 and $299,000 for interest expense payable to our consumer electronics manufacturers according to negotiated deferred payment schedules.

	Three months ended October 31,				Nine months ended October 31,
	2003		2002		2003		2002
	(In thousands)
Cash interest expense	$	203	$	514	$	575	$	1,552
Cash interest expense – related parties		175		319		525		1,089
Total cash interest expense		378		833		1,100		2,641
Total non-cash interest expense and other		952		1,776		2,815		3,925
Total interest expense and other	$	1,330	$	2,609	$	3,915	$	6,566

Provision for income taxes. Income tax expense is primarily due to franchise taxes paid to various states and foreign withholding taxes.

Series A convertible preferred stock dividend. Under the terms of the Series A convertible preferred stock, we were previously required to pay dividends to the Series A convertible preferred stockholders. Pursuant to the terms of the Funds Release Agreement dated April 29, 2002, AOL waived the preferred dividends and associated rights it was otherwise entitled to effective April 1, 2002. On April 30, 2002, we repurchased 1.6 million shares of our Series A convertible preferred stock. On September 13, 2002, the remaining 1,111,861 outstanding shares of Series A convertible preferred stock were converted into an equal number of shares of our common stock. The dividends payable for the nine months ended October 31, 2003 were therefore zero compared to $220,000 for the nine months ended October 31, 2002.

Accretion to redemption value of convertible preferred stock. As a result of our repurchase on April 30, 2002 of 1.6 million shares of our Series A convertible preferred stock held by AOL for $48.0 million, the associated issuance costs were accreted during the three months ended April 30, 2002. Prior to the first quarter of fiscal year 2003, these issuance costs were classified as additional paid-in capital for the Series A redeemable convertible preferred stock.

Quarterly Results of Operations

The following table represents certain unaudited statement of operations data for our eight most recent quarters ended October 31, 2003. In management’s opinion, this unaudited information has been prepared on the same basis as the audited annual financial statements and includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair representation of the unaudited information for the quarters presented. This information should be read in conjunction with our unaudited condensed consolidated financial statements, including the notes thereto, included elsewhere in this Quarterly Report on Form 10-Q. The results of operations for any quarter are not necessarily indicative of results that may be expected for any future period. Prior quarters have been reclassified in order to conform to current quarter classifications.

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				Three Months Ended
	Jan 31, 2002			Apr 30, 2002			Jul 31, 2002			Oct 31, 2002			Jan 31, 2003			Apr 30, 2003			Jul 31, 2003			Oct 31, 2003
	(unaudited, in thousands except per share data)
Revenues
Service revenues	$	6,753		$	8,216		$	9,510		$	10,185		$	11,350		$	12,702		$	13,757		$	16,018
Technology revenues		—			1,644			14,344			2,556			2,365			3,366			3,649			6,656
Hardware revenues		—			3,780			11,109			16,220			14,511			14,809			8,057			24,479
Rebates, revenue share and other payments to channel		—			(600	)		—			(3,968	)		(5,212	)		(2,357	)		1,209			(3,897	)
Net revenues		6,753			13,040			34,963			24,993			23,014			28,520			26,672			43,256
Costs of Revenues
Cost of service revenues		4,822			4,161			4,387			3,852			4,719			4,174			3,909			4,370
Cost of technology revenues		—			1,292			3,189			1,442			2,110			3,629			3,020			4,464
Cost of hardware revenues		—			3,665			11,346			15,588			14,048			14,178			8,558			25,413
Total costs of revenues		4,822			9,118			18,922			20,882			20,877			21,981			15,487			34,247
Gross margin		1,931			3,922			16,041			4,111			2,137			6,539			11,185			9,009
Operating Expenses
Research and development		5,874			5,002			4,518			4,875			6,319			5,472			5,789			5,432
Sales and marketing		2,770			7,855			5,608			2,050			2,116			2,126			2,593			3,549
Sales and marketing—related parties		24,959			22,922			3,434			2,283			1,849			1,873			1,909			2,155
General and administrative		4,587			3,759			3,589			3,752			3,365			3,778			4,061			3,949
Loss from operations		(36,259	)		(35,616	)		(1,108	)		(8,849	)		(11,512	)		(6,710	)		(3,167	)		(6,076	)
Interest income		101			4,099			146			89			149			114			116			133
Interest expense and other		(4,465	)		(1,580	)		(1,607	)		(2,293	)		(20,744	)		(1,099	)		(1,136	)		(1,155	)
Interest expense—related parties		(531	)		(412	)		(358	)		(316	)		(259	)		(175	)		(175	)		(175	)
Loss before income taxes		(41,154	)		(33,509	)		(2,927	)		(11,369	)		(32,366	)		(7,870	)		(4,362	)		(7,273	)
Provision for income taxes		—			—			(111	)		(150	)		(164	)		(12	)		(25	)		(115	)
Net loss		(41,154	)		(33,509	)		(3,038	)		(11,519	)		(32,530	)		(7,882	)		(4,387	)		(7,388	)
Less: Series A redeemable convertible preferred stock dividend		(428	)		(220	)		—			—			—			—			—			—
Less: Accretion to redemption value of convertible preferred Stock		—			(1,445	)		—			—			—			—			—			—
Net loss attributable to common stockholders	$	(41,582	)	$	(35,174	)	$	(3,038	)	$	(11,519	)	$	(32,530	)	$	(7,882	)	$	(4,387	)	$	(7,388	)
Net loss per share
Basic and diluted	$	(0.92	)	$	(0.74	)	$	(0.06	)	$	(0.23	)	$	(0.56	)	$	(0.12	)	$	(0.07	)	$	(0.11	)
Weighted average shares		45,276			47,344			47,994			51,041			58,496			64,021			65,834			68,226

The TiVo service is enabled through a digital video recorder that is sold in retail channels like other consumer electronic devices. We anticipate that our business will continue to be seasonal and we expect to generate a significant number of our annual new subscriptions during and immediately after the holiday shopping season. We also expect to generate a portion of future revenues from licensing agreements. When we complete obligations under our licensing and engineering professional services agreements, we will recognize revenue. This has led and is likely to continue to lead to an uneven pattern of quarterly revenue and revenue growth.

Liquidity and Capital Resources

From inception through October 31, 2003, we have financed our operations and met our capital expenditure requirements primarily from the proceeds of the sale of equity securities, including the proceeds from our initial public offering, the August 2001 private placement of convertible debt with warrants and funds generated from operations. Our cash resources are subject, in part, to the amount and timing of cash received from our subscriptions, licensing and engineering professional services customers, and hardware customers. On October 31, 2003, we had $61.8 million of cash and cash equivalents. We believe these funds and funds generated from future revenue represent sufficient resources to fund operations, capital expenditures and working capital needs through the next twelve months.

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Impact of changes to our business model. Over the past few years we have significantly changed our business to reduce emphasis on deployment and focus on accelerating our progress towards profitability. There were three components to this change:

• First, we significantly reduced the subsidies we agreed to pay to consumer electronics manufacturers to distribute TiVo-enabled platforms. This has lead to a significant reduction in our sales and marketing expenses. Our sales and marketing expenses for the nine months ended October 31, 2003 were $14.2 million, compared to $44.2 million during the nine months ended October 31, 2002.

• Second, we modified our agreements with DIRECTV so that DIRECTV took on the responsibility for customer acquisition, customer support, and service pricing for subscriptions to the TiVo service through DIRECTV. We restructured our relationship so that DIRECTV pays us per-household monthly fees for the right to provide their customers with TiVo services. We expect the change in this relationship to continue to increase growth in subscriptions to TiVo-enabled services and thus enable us to accelerate development of our advertising and audience measurement research revenue streams. Although reported revenues and gross profit from each DIRECTV subscription have decreased relative to past periods, cost of service revenues and subscription acquisition costs per new subscription have also decreased.

• Third, we have focused on selling technology licenses and engineering professional services, which generates cash, and, through our relationships with licensees and engineering professional services customers, may increase deployment of TiVo-enabled products or other streams of revenue. This has lead to the recognition of $13.7 million of technology revenues in the nine months ended October 31, 2003.

The combination of these factors and the growing base of recurring revenues from our subscriptions significantly reduced our net cash used in operating activities during the nine months ended October 31, 2003 compared to the nine months ended October 31, 2002.

Statement of Cash Flows Discussion

Net cash used in operating activities was $20.8 million for the nine months ended October 31, 2003. During this period, we continued to provide the TiVo service, incurring a net loss of $19.7 million. Uses of cash from operating activities included an increase in accounts receivable of $12.9 million, a decrease in deferred revenue-related parties of $4.8 million, an increase in inventories of $2.7 million, a decrease in accrued liabilities-related parties of $1.8 million, a decrease in accrued liabilities of $1.7 million and a decrease in other long-term liabilities of $904,000. Sources of cash provided by operating activities consisted of an increase in deferred revenue of $6.4 million, an increase in accounts payable of $6.1 million, and an increase in long-term deferred revenue of $1.6 million and a decrease in prepaid expenses-related parties, long term of $1.1 million.

Cash from deferred revenues has increased because we sell lifetime subscriptions and receive up front license and engineering professional services payments. These activities cause us to receive cash payments in advance of providing the services for which the cash is received, which we recognize as deferred revenues.

Net cash used in investing activities for the nine months ended October 31, 2003 was $1.6 million for the acquisition of property and equipment.

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Net cash provided by financing activities was $40.0 million for the nine months ended October 31, 2003. We obtained $26.6 million in cash, less cash financing expense of $500,000, from the issuance of common stock. Additionally, we obtained $6.2 million from the issuance of common stock for stock options exercised, $6.0 million in borrowings under our bank line of credit, and $1.7 million from the issuance of common stock through our employee stock purchase plan.

Financing agreements

$100 Million Universal Shelf Registration Statement. We have an effective universal shelf registration statement on file with the Securities and Exchange Commission under which we may issue up to $100,000,000 of securities, including debt securities, common stock, preferred stock and warrants. Depending upon market conditions, we may issue securities under this or future shelf registration statements.

June 2003 Common Stock Offering. On June 26, 2003, we announced a $27.3 million underwritten public offering of approximately 2.9 million shares of our common stock, par value $.001 per share, at a public offering price of $9.50 per share. The shares of common stock were registered pursuant to our universal shelf registration statement on Form S-3 (File No. 333-53152) under the Securities Act of 1933, as amended, as supplemented by a registration statement on Form S-3 (File No. 333-106507) filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended. The offering closed on July 1, 2003 with net proceeds of approximately $26.1 million after deducting our cash offering expenses of approximately $500,000. We are using the net proceeds from this offering primarily to create additional cash reserves and supplement working capital. We may from time to time also use a portion of the net proceeds for funding research and development, sales and marketing, reducing indebtedness, and capital expenditures. However, we do not currently intend to use the proceeds to increase expenses or capital expenditures.

October 2002 Common Stock Offering. On October 7, 2002, we executed a purchase agreement with certain institutional investors to issue and sell 6,963,788 shares of our common stock, par value $.001 per share, for a per share purchase price of $3.59 and an aggregate purchase price of $25.0 million, plus warrants to purchase 1,323,120 shares of our common stock with a term of three years and an exercise price of $5.00 per share and warrants to purchase an additional 1,323,120 shares of our common stock with a term of four years and an exercise price of $5.00 per share. The shares of common stock, warrants and shares of common stock issuable upon exercise of the warrants were registered pursuant to our universal shelf registration statement on Form S-3, as amended. The offering closed on October 8, 2002 with net proceeds of approximately $24.3 million after deducting our cash offering expenses of approximately $650,000. We are using the net proceeds from this offering for general corporate purposes, which may include funding research and development, sales and marketing expenses, capital expenditures and as part of our working capital.

7% Convertible Senior Notes Due 2006. On August 28, 2001, we closed a private placement of $51.8 million in face value of convertible notes and received cash proceeds of approximately $43.7 million from investors. In addition, we received non-cash consideration of $8.1 million in the form of advertising and promotional services from Discovery Communications, Inc. and the National Broadcasting Company, Inc., who are existing stockholders. Debt issuance costs were approximately $3.6 million, resulting in net cash proceeds of approximately $40.1 million. Of the total proceeds of $51.8 million, $8.1 million was recorded as prepaid advertising and promotional services. As part of the transaction, we paid $5.0 million in October 2001 to NBC for advertising that ran during the period that began October 1, 2001 and ended March 31, 2002.

The indenture governing our convertible senior notes specified a reduction of the conversion price of outstanding convertible notes on August 23, 2002 if the conversion price was greater than the average closing price per share of our common stock for the 10 consecutive trading days preceding August 23, 2002, subject to a floor of $4.21 per share. On August 23, 2002, pursuant to the terms of the indenture, the conversion price of the notes was accordingly adjusted to $4.21 per share. The adjustment to the conversion price resulted in an increase to the value of the beneficial conversion on the

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notes of $13.4 million and we recorded additional debt discount of this amount, which is being amortized as interest expense over the remaining term of the notes or until the notes are converted.

On October 7, 2002, we entered into an agreement for the issuance of common stock and warrants for cash of $25.0 million to institutional investors. Pursuant to the terms of the indenture governing the notes, we attributed a value of $3.23 per share to the common stock issued in this transaction, which was less than the “effective” conversion price of the notes at that time of $3.41 per share. Accordingly, we were required pursuant to the terms of the indenture governing the notes as described below to reduce the conversion price of the notes from $4.21 per share to $3.99 per share so that the “effective” conversion price of the notes would equal to the value of this common stock. The adjustment to the “effective” conversion price resulted in an increase to the value of the beneficial conversion on the notes of $3.2 million and we recorded additional debt discount of this amount, which is being amortized as interest expense over the remaining term of the notes or until the notes are converted.

During the period beginning on December 30, 2002 and ending on January 28, 2003, we temporarily reduced the conversion price of our convertible notes from $3.99 to $3.70 per share pursuant to the indenture governing the notes in order to induce early conversions and thereby simplify our capital structure and reduce future cash interest payment obligations. During this period, $22.7 million principal amount of the $43.2 million outstanding principal amount of the notes were converted into an aggregate of 6,135,400 shares of our common stock. The reduced conversion price resulted in 445,936 shares of common stock being issued in addition to the 5,689,464 shares of common stock that would have been issuable upon conversion of the $22.7 million principal amount of notes at $3.99 per share.

We entered into a registration rights agreement with the holders of 375,216 of the additional shares issued upon conversion of the notes which were “restricted securities” as defined by Rule 144 under the Securities Act of 1933, as amended. Pursuant to this registration rights agreement, in February 2003 we filed with the Securities and Exchange Commission a shelf registration statement covering the resale of the 375,216 additional restricted shares. This registration statement was declared effective on June 16, 2003. We have agreed to use our best efforts to keep this shelf registration statement continuously, subject to certain blackout periods, effective until the earlier of the sale under the registration statement of all transfer restricted securities (as defined in the registration rights agreement) or two years after the date on which we issued the notes from which these shares were converted.

In addition, the conversion price on our outstanding convertible senior notes would have been reduced if, prior to August 28, 2003, we issued common stock or common stock equivalents at an issuance price less than what the indenture governing the notes refers to as the “effective” conversion price on the notes (or with respect to common stock equivalents, such additional common stock is issued with a conversion or exercise price per share less than the “effective” conversion price of the notes.). Since we did not issue common stock or common stock equivalents at an issuance price less then the effective conversion price prior to August 28, 2003, except as described above, the conversion price was not further adjusted and it will not be adjusted in the future based upon our issuance of common stock or common stock equivalents.

Operating Activities

On July 17, 2003, we entered into a loan and security agreement with Silicon Valley Bank, whereby Silicon Valley Bank agreed to extend to us a revolving line of credit of up to the lesser of $6 million or a borrowing base. The borrowing base is equal to the sum of 80% of eligible accounts receivable plus 100% of pledged certificates of deposit (up to $2 million). The line of credit is secured by a first priority security interest on all of our assets except for our intellectual property. We are required to maintain at least $2 million in pledged certificates of deposit with Silicon Valley Bank during the term of the line of credit. The line of credit bears interest at the greater of prime plus 0.75% or 5.00% per annum, but in an event of default, the interest rate becomes 3.00% above the rate effective immediately before the event of default. The loan and security agreement includes, among other terms and conditions, limitations on our ability to dispose of our assets; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness (other than certain types of permitted indebtedness, including existing and subordinated debt and debt to trade creditors incurred in the ordinary

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course of business); create, incur or allow any lien on any of our property or assign any right to receive income except for certain permitted liens; make investments; pay dividends; or make distributions; and contains a requirement that we maintain certain financial ratios. At October 31, 2003, we were in compliance with these covenants and we had incurred borrowings of $6.0 million on the credit line. The line of credit terminates and any and all borrowings are due on June 30, 2004, but may be terminated earlier by us without penalty upon written notice and prompt repayment of all amounts borrowed.

We have agreed to share a substantial portion of our subscription and other fees with some of our customers, consumer electronics manufacturers and retailers in order to promote the TiVo service and encourage the manufacture and distribution of the DVRs that enable the TiVo service. These agreements may require us to share substantial portions of the subscription and other fees attributable to the same subscription with multiple parties. Our decision to share subscription revenues is based on our expectation that these relationships will help us obtain subscriptions, broaden market acceptance of digital video recorders and increase our future revenues. If these expectations are not met, we may be unable to generate sufficient revenue to cover our expenses and obligations. Expenses paid in exchange for marketing services to our consumer electronics manufacturers who are also stockholders are recognized as “sales and marketing—related parties expenses.” Expenses paid in exchange for marketing services to our consumer electronics manufacturers that are not our stockholders are recognized as “sales and marketing expenses.” Expenses paid in exchange for marketing services to our customers are recognized as a reduction of revenue as “rebates, revenue share and other payments to channel”.

Although we intend to continue to reduce subsidy payments in the future, in certain agreements we have agreed to pay some of our customers a per-unit subsidy for each DVR that they manufacture and sell. The amount of the payments varies depending upon the manufacturing costs and selling prices. In addition, in the event our consumer electronics manufacturers are unable to manufacture the DVRs at the costs currently estimated or if selling prices are less than anticipated, we may owe additional amounts to them, which could adversely affect our operating results. Under some of these arrangements, we are obligated to pay a portion of the subsidy when the DVR is shipped, and we will not receive any revenues related to the unit until the unit is sold to the consumer and the consumer activates the TiVo service. We may make additional subsidy payments in the future to consumer electronics and other manufacturers in an effort to maintain a commercially viable retail price for the DVRs and other devices that enable the TiVo service.

Additionally, a substantial portion of our contractual cash obligations come from our convertible notes due in 2006. Based principally on the temporary reduction in the conversion price of the convertible notes in the fourth quarter of fiscal year 2003, approximately $23 million principal amount of the convertible notes were converted into equity during the fiscal year ended January 31, 2003, reducing our cash interest payment obligations and the principal amount due upon maturity of these notes.

We may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, temporary conversion price reductions or otherwise. Such repurchases or exchanges will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Our future capital requirements will depend on a variety of factors, including market acceptance of the digital video recorder and the TiVo service, the resources we devote to developing, marketing, selling and supporting our products and other factors. We expect to devote substantial capital resources:

• to develop new or enhance existing services or products;

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• to continue support of our current and new customers;

• to expand our engineering professional services business;

• to manufacture the Series2 TiVo-enabled DVRs; and

• for general corporate purposes.

We have commitments for future lease payments under facilities operating leases of $10.8 million as of October 31, 2003.

As of October 31, 2003, we had contractual obligations to make the following cash payments:

	Total		Less than 1 year		1-3 years		4-5 years		Over 5 years
	(In thousands)
Operating leases	$	10,809	$	3,181	$	7,628	$	—		—
Repayment of Bank line of credit		6,000		6,000		—		—		—
Long-term convertible notes payable at face value		20,450		—		20,450		—		—
Coupon interest on long-term convertible notes payable		4,295		1,432		2,863		—		—
Total contractual cash obligations	$	41,554	$	10,613	$	30,941	$	—	$	—

Other commercial commitments as of October 31, 2003, are as follows:

	Total		Less than 1 year		1-3 years		4-5 years		Over 5 years
	(In thousands)
Standby letter of credit	$	477	$	—	$	477	$	—	$	—
Total commercial commitments	$	477	$	—	$	477	$	—	$	—

In addition, in order to meet long-term liquidity needs, we may need to raise additional funds, establish additional credit facilities or seek other financing arrangements. Additional funding may not be available on favorable terms or at all. See “Factors That May Affect Future Operating Results–If we are unable to raise additional capital on acceptable terms, our ability to effectively manage growth and build a strong brand could be harmed.”

Impact of Inflation

We believe that inflation has not had a significant impact on our operating results.

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Factors That May Affect Future Operating Results

In addition to the other information included in this Report, the following factors should be considered in evaluating our business and future prospects:

We have recognized limited revenue, have incurred significant net losses and may never achieve profitability.

We have recognized limited revenue, have incurred significant net losses and have had substantial negative cash flow. During the nine months ended October 31, 2003 our net loss attributable to common stockholders was $19.7 million. As of October 31, 2003, we had an accumulated deficit of $564.9 million. We expect to incur significant operating expenses over the next several years in connection with the continued development and expansion of our business. As a result, we expect to continue to incur net losses for the foreseeable future. The size of these net losses depends in part on our subscription revenues and on our expenses. We will need to generate significant additional revenues to achieve profitability. Consequently, we may never achieve profitability, and even if we do, we may not sustain or increase profitability on a quarterly or annual basis in the future.

Our limited operating history may make it difficult for us or investors to evaluate trends and other factors that affect our business.

We were incorporated in August 1997 and we have been providing subscription services only since March 31, 1999. Prior to that time, our operations consisted primarily of research and development efforts. To date, only a limited number of DVRs have been sold and we have obtained only a limited number of subscriptions to the TiVo service.

As a result of our limited operating history, our historical financial and operating information is of limited value in evaluating our future operating results. It may be difficult to accurately predict our future revenues, costs of revenues, expenses or results of operations. In addition, any evaluation of our business must be made in light of the risks and difficulties encountered by companies offering products or services in new and rapidly evolving markets. DVR services are a new product category for consumers and it may be difficult to predict the future growth rate, if any, or size of the market for our products and services. We may be unable to accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us. As a result, we may be unable to make accurate financial forecasts and adjust our spending in a timely manner to compensate for any unexpected revenue shortfall. Such inability could cause our net losses in a given quarter to be greater than expected, which could cause the price of our stock to decline.

We face a number of challenges in the sale and marketing of the TiVo service and products that enable the TiVo service.

Our success depends upon a continually successful retail marketing of the TiVo service and related DVRs, which began in the third quarter of calendar year 1999.

Many consumers are not aware of the benefits of our products. DVR products and services represent a relatively new consumer electronics category. Retailers, consumers and potential partners may perceive little or no benefit from digital video recorder products and services. We have only been providing the TiVo service since 1999 and many consumers are not aware of its benefits and therefore, may not value the TiVo service and products that enable the TiVo service. We will need to devote a substantial amount of time and resources to educate consumers and promote our products in order to increase our subscriptions. We cannot be sure that a broad base of consumers will ultimately subscribe to the TiVo service or purchase the products that enable the TiVo service.

Consumers may not be willing to pay for our products and services. Many of our customers already pay monthly fees for cable or satellite television. We must convince these consumers to pay an additional subscription fee to receive the TiVo service. Consumers may perceive the TiVo service and related DVR as too expensive. In order to continue to grow our subscription base, we will need to continue to reduce our costs and lower the price of our DVR. The availability of competing services that do not require subscription fees will harm our ability to effectively attract and retain subscriptions. In addition, DVRs that enable the TiVo service can be used to pause, rewind and fast-forward through live shows without an active subscription to the TiVo service. If a significant number of purchasers of the TiVo-enabled DVRs use these devices without subscribing to the TiVo service or cancel their existing subscriptions, our revenue growth will decline and we may not achieve profitability.

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We compete with other consumer electronics products and home entertainment services for consumer spending. DVRs and the TiVo service compete in markets that are crowded with other consumer electronics products and home entertainment services. The competition for consumer spending is intense and many consumers on limited budgets may choose other products and services over ours. DVRs compete for consumer spending with products such as DVD players, satellite television systems, personal computers and video game consoles. The TiVo service competes with home entertainment services such as cable and satellite television, movie rentals, pay-per-view and video on demand. See “We face intense competition from a number of sources, which may impair our revenues and ability to generate subscriptions.”

We compete with digital cable and satellite DVRs. Cable and satellite service providers are accelerating deployment of integrated cable and satellite receivers with DVRs that bundle basic DVR services with other digital services and do not require the customer to purchase hardware.

Many of these products or services have established markets, broad user bases and proven consumer acceptance. In addition, many of the manufacturers and distributors of these competing devices and services have substantially greater brand recognition, market presence, distribution channels, advertising and marketing budgets and promotional and other strategic partners. Faced with this competition, we may be unable to effectively differentiate the DVR or the TiVo service from other consumer electronics devices or entertainment services.

It is expensive to establish a strong brand. We believe that establishing and strengthening the TiVo brand is critical to achieving widespread acceptance of our products and services and to establishing key strategic relationships. The importance of brand recognition will increase as current and potential competitors enter the digital video recorder market with competing products and services. Our ability to promote and position our brand depends largely on the success of our marketing efforts and our ability to provide high quality services and customer support. These activities are expensive and we may not generate a corresponding increase in subscriptions or revenues to justify these costs. If we fail to establish and maintain our brand, or if our brand value is damaged or diluted, we may be unable to attract subscriptions and effectively compete in the digital video recorder market.

We rely on our customers and consumer electronics manufacturers to market and distribute our products and services. In addition to our own efforts, our customers and consumer electronics manufacturers distribute DVRs that enable the TiVo service. We rely on their sales forces, marketing budgets and brand images to promote and support DVRs and the TiVo service. We expect to continue to rely on our relationships with these companies to promote and support DVRs and other devices that enable the TiVo service. The loss of one or more of these companies could require us to undertake more of these activities on our own. As a result, we would spend significant resources to support DVRs and other devices that enable the TiVo service. We also expect to rely on DIRECTV and other partners to provide marketing support for the TiVo service. The failure of one or more of these companies to provide anticipated marketing support will require us to divert more of our limited resources to marketing the TiVo service. If we are unable to provide adequate marketing support for DVRs and the TiVo service, our ability to attract subscriptions to the TiVo service will be limited.

We face intense competition from a number of sources, which may impair our revenues and ability to generate subscriptions.

The DVR market is new and rapidly evolving, and we expect to face significant competition in our efforts to secure broad market acceptance. We believe that the principal competitive factors in the DVR market are brand recognition, brand awareness, ease of use, pricing, and functionality. We currently see two primary categories of DVR competitors: standalone DVRs offered by consumer electronics companies, and integrated DVRs offered by cable and satellite operators.

Within each of these two categories, the competition can be further segmented into those offering what we define as basic DVR functionality, and those offering enhanced DVR functionality. Basic DVR functionality includes no or limited program guide data and “VCR-like” controls with manual timeslot-based recordings, usually with no DVR service fee after the consumer purchases the enabling hardware. The TiVo Basic service is an example of basic DVR functionality. Enhanced

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DVR functionality includes rich program guide data and enhanced scheduling and personalization features, and may or may not require a DVR service fee. The TiVo service is an example of enhanced DVR functionality.

Moreover, the market for in-home entertainment is intensely competitive and subject to rapid technological change. If new technologies render the DVR market obsolete, we may be unable to generate sufficient revenue to cover our expenses and obligations.

Consumer Electronics Competitors. We compete against several types of products with basic or enhanced DVR functionality offered by consumer electronics companies. These products record an analog television signal output from a cable or satellite set-top box, analog cable feed, or antenna.

• Standalone DVRs: ReplayTV has been our primary competitor in the standalone DVR market, offering products with some enhanced DVR functionality. ReplayTV was acquired by SONICblue Incorporated in February 2001. ReplayTV introduced a new line of DVRs in late 2001 that allow consumers to automatically skip commercials and share recordings via the Internet. In March 2003, SONICblue filed for Chapter 11 bankruptcy protection, and in April 2003 it sold the ReplayTV business unit, along with its Rio digital audio unit, to D&M Holdings. D&M Holdings is the parent company of Denon and Marantz, manufacturers of premium audio and video consumer electronics products. We expect ReplayTV under D&M Holdings ownership to attempt to mount determined competition.

• DVD devices with integrated DVRs: Several consumer electronics companies, including Thomson Multimedia and Panasonic, are producing DVRs integrated with DVD players or DVD recorders. In general these products cost upwards of $500 but do not require DVR service fees, and offer basic DVR functionality with no or limited program guide data.

• Personal computers with DVR software: Microsoft’s Windows XP Media Center Edition, a version of its Windows operating system for PCs first released in late 2002, contains expanded digital media features including some enhanced DVR functionality. In addition, Sony offers basic DVR functionality on some of its VAIO PCs, using its own proprietary GigaPocket software. In addition, both Microsoft and Sony have announced plans to build DVR functionality into their X-Box and Playstation video game consoles.

Satellite and Cable Integrated DVR Competitors. The DIRECTV satellite receiver with TiVo service competes against other cable and satellite set-top boxes that integrate basic or enhanced DVR functionality into multi-channel receivers.

• Satellite: EchoStar released the DishPVR 501 in 2001, which combined EchoStar Dish Network satellite reception with basic DVR functionality, including repeating timer-based recordings. This product uses DVR software from OpenTV, a provider of interactive TV software to cable and satellite operators. In July 2002, EchoStar released the DishPVR 721, which like the DIRECTV receiver with TiVo service offers dual-tuner functionality, allowing a user to record two shows that are televised at the same time, but with a more limited basic DVR feature set. EchoStar provides this service bundled with a premium set-top box and does not charge recurring fees.

In the past, we faced significant competition from Microsoft’s UltimateTV, which was launched in Spring 2001 and, like the DIRECTV receiver with TiVo service, combined DIRECTV satellite programming reception and DVR functionality. In 2002, DIRECTV and TiVo announced that DIRECTV had selected the TiVo platform as its main DVR platform, and Microsoft ceased further production of UltimateTV hardware.

• Cable: Scientific-Atlanta sells its Explorer 8000 integrated digital cable DVR set-top box to cable operators including Time Warner Cable and Cox Communications. This product combines digital and analog cable reception with dual-tuner DVR functionality, and uses software from Metabyte Networks and Keen Personal Media to provide some enhanced DVR functionality.

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Motorola has licensed DVR technology from ReplayTV and Gotuit, and has announced its own plans for integrated cable DVRs. In addition, both Scientific-Atlanta and Motorola have announced plans to build integrated cable DVRs for cable operator Charter Communications using Moxi Media Center software from Digeo.

Other DVR technology providers targeting the integrated DVR space include set-top box manufacturers Pioneer and Pace, and software providers NDS and Canal+ Technologies. We expect international competitors such as NDS and Canal+ to be a presence in the European markets as they develop. While their presence in the U.S. market has been insignificant to date it may become significant in the future.

• Video on Demand: U.S. cable operators are currently deploying server-based Video on Demand (VOD) technology from SeaChange, Concurrent, nCube, and others, which could potentially evolve into competition for TiVo and other DVR service providers. Server-based VOD relies on content servers located within the cable operator’s central head-end that stream video across the network to a digital cable set-top box within the consumer’s home. Cable operators can use VOD to deliver movies, television shows, and other content to consumers. Consumers can watch this programming on demand, with VCR-like pausing and rewinding capabilities. Operators can charge consumers for access to VOD content on a per-transaction or monthly subscription basis, or can offer content for free. To the extent that cable operators begin to offer regular television programming as part of their VOD offerings, consumers will have an alternate means of watching time-shifted shows other than using DVRs. AOL Time Warner is reportedly developing a VOD system called Mystro that will allow users to view certain television programming on demand and Comcast has rolled VOD out in several markets.

Licensing Fees. Our licensing revenues depend both upon our ability to successfully negotiate licensing agreements with our customers and, in turn, upon our customers and consumer electronics manufacturers’ successful commercialization of their underlying products. In addition, we face competition from companies such as Microsoft, OpenTV, Metabyte Networks, NDS, Canal+ Technologies, D&M Holdings, Digeo and Gotuit who have created competing digital video recording technologies. Such companies may offer more economically attractive licensing agreements to manufacturers of DVRs.

Established competition for advertising budgets. Digital video recorder services, in general, and TiVo, specifically, also competes with traditional advertising media such as print, radio and television for a share of advertisers’ total advertising budgets. If advertisers do not perceive digital video recording services as an effective advertising medium, they may be reluctant to devote a significant portion of their advertising budget to promotions on the TiVo service. In addition, advertisers may not support or embrace the TiVo technology due to a belief that our technology’s ability to fast forward through commercials will reduce the effectiveness of general television advertising.

Our relationship with DIRECTV could be affected by a proposed acquisition of Hughes Electronics by News Corp.

In April 2003, General Motors announced that it had agreed to split off Hughes Electronics Corporation, the parent company of DIRECTV and simultaneously sell its 19.9% economic interest in Hughes to News Corp. Pursuant to this agreement, News Corp. would also acquire an additional 34% of the split-off entity from stockholders. The Staff of the Federal Communications Commission recently recommended that the Commission approve the transaction, subject to certain conditions.

If this transaction closes, it is possible that DIRECTV under News Corp. control could seek to transition to an alternate DVR technology platform, such as that created by NDS, which is owned by News Corp. It is also possible that News Corp. could slow the pace of DVR deployment by DIRECTV in an effort to protect its content businesses from perceived threats posed by DVRs.

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We have agreed to share a substantial portion of the revenue we generate from subscription fees with some of our customers and consumer electronics companies. We may be unable to generate enough revenue to cover these obligations.

We have agreed to share a substantial portion of our subscription and other fees with some of our customers and consumer electronics manufacturing companies in exchange for manufacturing, distribution and marketing support, and discounts on key components for DVRs. Under these agreements, we may be required to share substantial portions of the subscription and other fees attributable to the same subscription with multiple companies. These agreements also require us to share a portion of our subscription fees whether or not we increase or decrease the price of the TiVo service. If we change our subscription fees in response to competitive or other market factors, our operating results would be adversely affected. Our decision to share subscription revenues is based on our expectation that these relationships will help us obtain subscriptions, broaden market acceptance of digital video recorders and increase our future revenues. If these expectations are not met, we may be unable to generate sufficient revenue to cover our expenses and obligations.

We depend on a limited number of third parties to manufacture, distribute and supply critical components and services for the DVRs that enable the TiVo service. We may be unable to operate our business if these parties do not perform their obligations.

The TiVo service is enabled through the use of a DVR made available by us through a sole third-party contract manufacturer and a limited number of other third parties. In addition, we rely on sole suppliers for a number of key components for the DVRs. We do not control the time and resources that these third parties devote to our business. We 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 its agreement with us or otherwise fails to perform their obligations in a timely manner, we may be delayed or prevented from commercializing our products and services. Because our relationships with these parties are non-exclusive, they may also support products and services that compete directly with us, or offer similar or greater support to our competitors. Any of these events could require us to undertake unforeseen additional responsibilities or devote additional resources to commercialize our products and services. This outcome would harm our ability to compete effectively and achieve increased market acceptance and brand recognition.

In addition, we face the following risks in relying on these third parties:

If our manufacturing relationships are not successful, we may be unable to satisfy demand for our products and services. We manufacture DVRs that enable the TiVo service through a third-party contract manufacturer. We also have entered and anticipate entering into agreements with consumer electronics manufacturers to manufacture and distribute DVRs that enable the TiVo service. However, we have no minimum volume commitments from any manufacturer. The ability of our consumer electronics manufacturers to reach sufficient production volume of DVRs to satisfy anticipated demand is subject to delays and unforeseen problems such as defects, shortages of critical components and cost overruns. Moreover, they will require substantial lead times to manufacture anticipated quantities of the DVRs that enable the TiVo service. Delays, product shortages, and other problems could impair the retail distribution and brand image and make it difficult for us to attract subscriptions. In addition, the loss of a manufacturer would require us to identify and contract with alternative sources of manufacturing, which we may be unable to do and which could prove time-consuming and expensive. Although we expect to continue to contract with additional consumer electronics companies for the manufacture of DVRs in the future, we may be unable to establish additional relationships on acceptable terms.

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We are dependent on single suppliers for several key components and services. If these suppliers fail to perform their obligations, we may be unable to find alternative suppliers or deliver our products and services to our customers on time. We currently rely on sole suppliers for a number of the key components and services used in the DVRs and the TiVo service. For example:

• NEC is the sole supplier of the CPU and application specific integrated circuit semiconductor devices;

• Broadcom is the sole supplier of the MPEG2 encoder and decoder semiconductor devices;

• ATMEL is the sole supplier of the secure microcontroller semiconductor device; and

• Tribune Media Services is the sole supplier of program guide data.

Tribune is the sole supplier of the program guide data for the TiVo service. On June 1, 1998 we entered into a television listing agreement with Tribune. Tribune agreed to provide program guide data for the TiVo service in exchange for a monthly fee. In the event that we request format changes or require additional services, Tribune may increase its fees depending on the change in service requested. The term of the television listing agreement was for eighteen months and automatically renews for one year periods unless either party provides written notice of termination. On November 10, 1998, we entered into a data license agreement with Tribune Media Services which sets forth a schedule of fees for the program guide data provided to us. The term of the data license agreement was for twenty-one months and automatically renews for one year periods unless either party provides written notice of termination.

Because we do not require customized components from NEC, Broadcom or ATMEL suppliers, we do not have binding supply agreements with these suppliers. Therefore, they are not contractually obligated to supply us with these key components on a long-term basis or at all. In addition to the above, we have several sole suppliers for key components of our products currently under development.

If our arrangements or our consumer electronics manufacturers’ arrangements with NEC, Broadcom, ATMEL or Tribune Media Services were to terminate or expire, 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 have limited experience in overseeing manufacturing processes and managing inventory and failure to do so effectively may result in supply imbalances or product recalls.

We have contracted for the manufacture of certain Series2 TiVo-enabled DVRs with a contract manufacturer. We sell these units to retailers and distributors, as well as through our own online sales efforts. As part of this effort, we expect to maintain some finished goods inventory of the Series2 units throughout the year. Overseeing manufacturing processes and managing inventory are outside of our core business and our experience in these areas is limited. If we fail to effectively oversee the manufacturing process and manage inventory, we may suffer from insufficient inventory to meet consumer demand or excess inventory. Ineffective oversight of the manufacturing process could also result in product recalls.

We have agreed to subsidize the cost of manufacturing DVRs, which may adversely affect our operating results and ability to achieve profitability.

We have entered into agreements with our consumer electronics manufacturers to manufacture DVRs that enable the TiVo service. Although we intend to continue to reduce subsidy payments in the future, in certain agreements we have agreed to pay our manufacturers a per-unit subsidy for each DVR that they manufacture and sell. The amount of the payments can vary depending upon the manufacturing costs and selling prices. In addition, in the event our manufacturers are unable to

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manufacture the DVRs at the costs currently estimated or if selling prices are less than anticipated, we may owe additional amounts to them, which could adversely affect our operating results. Under some of these arrangements, we are obligated to pay a portion of the subsidy when the DVR is shipped, and we will not receive any revenues related to the unit until the unit is sold and the purchaser activates the TiVo service. We may make additional subsidy payments in the future to consumer electronic and other manufacturers in an effort to maintain a commercially viable retail price for the DVRs and other devices that enable the TiVo service.

The lifetime subscriptions to the TiVo service that we currently offer commit us to providing services for an indefinite period. The revenue we generate from these subscriptions may be insufficient to cover future costs.

We currently offer product lifetime subscriptions that commit us to provide service for as long as the DVR is in service. We receive the lifetime subscription fee for the TiVo service in advance and amortize it as subscription revenue over four years, which is our estimate of the service life of the DVR. If these lifetime subscriptions use the DVR for longer than anticipated, we will incur costs without a corresponding revenue stream and therefore will be required to fund ongoing costs of service from other sources.

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.

If we fail to manage our growth, it could disrupt our business and impair our ability to generate revenues.

The growth in our subscription base has 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:

We reduced our headcount and other expenditures in the last fiscal year and as a result, our headcount may be inadequate to support our business. In the current economic environment, reducing expenditures and conserving cash has become one of our priorities. We reduced our headcount in the last fiscal year and we are aggressively pursing cost-saving opportunities. As a result, our current resources may be inadequate to support our business during the holiday shopping season, which is typically the busiest season of our business, or to support the future growth of our business.

Any inability of our systems to accommodate our expected subscription growth may cause service interruptions or delay our introduction of new services. 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.

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

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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 impact 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. Our current and planned systems, procedures and controls may not be adequate to support our future operations and expected growth. For example, we replaced our accounting and billing system at the beginning of August 2000. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely impact our relationships with our customers and cause harm to our reputation and brand. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could also result in errors in our financial and other reporting.

Tiered pricing for the TiVo service may reduce our average revenue per user.

In May 2003 we announced that we will provide licensees the opportunity to include the TiVo Basic service, which provides our licensees the opportunity to include entry-level DVR functionality with their integrated products. This service can be upgraded by the consumer to the full TiVo service for $12.95 a month or $299 for the lifetime of the product. To the extent that consumers do not upgrade to the full TiVo service, our average revenue per user will decline. In addition, we may elect to offer additional tiers of the TiVo service at various price points, which may also have the effect of reducing our average revenue per user.

If we are unable to create multiple revenue streams, we may not be able to cover our expenses or meet our obligations to strategic partners and other third parties.

Although our initial success depends on building a significant customer base and generating subscription fees from the TiVo service, our long-term success will depend on securing additional revenue streams such as:

• licensing;

• advertising;

• audience measurement research;

• revenues from programmers; and

• electronic commerce.

In order to derive substantial revenues from these activities, we will need to attract and retain a large and growing base of subscriptions to the TiVo service. We also will need to work closely with television advertisers, cable and satellite network operators, electronic commerce companies and consumer electronics manufacturers to develop products and services in these areas. We may not be able to effectively work with these parties to develop products that generate revenues that are sufficient to justify their costs. In addition, we are currently obligated to share a portion of these revenues with several of our strategic partners. Any inability to attract and retain a large and growing group of subscriptions and strategic partners will seriously harm our ability to support new services and develop new revenue streams.

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Entertainment companies may claim that some of the features of our DVRs violate copyright laws, which could force us to incur significant costs in defending such actions and impact our ability to market the TiVo service and the products that enable the TiVo service.

Although we have not been the subject of such actions to date, one of our former competitor’s digital video recorders was the subject of several copyright infringement lawsuits by a number of major entertainment companies, including the three major television networks. These lawsuits alleged that the competitor’s digital video recorders violate copyright laws by allowing users to skip commercials, delete recordings only when instructed and use the Internet to send recorded materials to other users. TiVo Series2 DVRs have some, but not all, of the same features, including the ability to fast forward through commercials and the ability to delete recordings only when instructed. Based on market or consumer pressures, we may decide in the future to add additional features similar to our former competitor’s or that may otherwise be objectionable to entertainment companies. If similar actions are filed against us based on current or future features of our DVRs, entertainment companies may seek injunctions to prevent us from including these features and/or damages. Such litigation can be costly and may divert the efforts of our management. Furthermore, if we were ordered to remove features from our DVRs, we may experience increased difficulty in marketing the TiVo service and related TiVo-enabled DVRs and may suffer reduced revenues as a result.

If we are unable to introduce new products or services, or if our new products and services are unsuccessful, the growth in our subscription base and revenues may suffer.

To attract and retain subscriptions and generate revenues, we must continue to add functionality and content and introduce products and services which embody new technologies and, in some instances, new industry standards. This challenge will require hardware and software improvements, as well as new collaborations with programmers, advertisers, network operators, hardware manufacturers and other strategic partners. These activities require significant time and resources and may require us to develop and promote new ways of generating revenue with established companies in the television industry. These companies include television advertisers, cable and satellite network operators, electronic commerce companies and consumer electronics manufacturers. In each of these examples, a small number of large companies dominate a major portion of the market and may be reluctant to work with us to develop new products and services for digital video recorders. If we are unable to further develop and improve the TiVo service or expand our operations in a cost-effective or timely manner, our ability to attract and retain customers and generate revenue will suffer.

Product defects, system failures or interruptions to the TiVo service may have a negative impact on our revenues, damage our reputation and decrease our ability to attract new customers.

Our ability to provide uninterrupted service and high quality customer support depends on the efficient and uninterrupted operation of our computer and communications systems. Our computer hardware and other operating systems for the TiVo service are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunication failures and similar events. They are also subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. These types of interruptions in the TiVo service may reduce our revenues and profits. We currently house the server hardware that delivers the TiVo service at only one location and continue to explore the benefits of establishing a backup facility. Our business also will be harmed if consumers believe our service is unreliable. In addition to placing increased burdens on our engineering staff, service outages will create a flood of customer questions and complaints that must be responded to by our customer support personnel. Any frequent or persistent system failures could irreparably damage our reputation and brand.

We have detected and may continue to detect errors and product defects. These problems can affect system uptime and result in significant warranty and repair problems, which could cause customer service and customer relations problems. Correcting errors in our software or fixing defects in our products requires significant time and resources, which could delay product releases and affect market acceptance of the TiVo service. Any delivery by us of products or upgrades with undetected material product defects or software errors could harm our credibility and market acceptance of the DVRs and the

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TiVo service. In addition, defective products could cause a risk of injury that may subject us to litigation or cause us to have to undertake a product recall. For example, we have become aware of occasions where a part has come loose from the remote control device that comes with the DVRs that enable the TiVo service, including occurrences where a young child has gagged on or ingested a part of the remote control device. While we are unaware of any injuries resulting from the use of our products, if we are required to repair or replace any of our products, we could incur significant costs, which would have a negative impact on our financial condition and results of operations.

Intellectual property claims against us can be costly and could result in the loss of significant rights.

From time to time, we receive letters form third parties alleging that we are infringing their intellectual property. Regardless of their merit, we are forced to devote time and resources to respond to these letters. In addition, if any of these third parties or others were to bring suit against us, our business could be harmed because intellectual property litigation may:

• be time-consuming and expensive;

• divert management’s attention and resources away from our business;

• cause delays in product delivery and new service introduction;

• cause the cancellation of new products or services; or

• require us to pay significant royalties or licensing fees.

The emerging enhanced-television industry is highly litigious, particularly in the area of on-screen program guides. Additionally, many patents covering interactive television technologies have been granted but have not been commercialized. For example, we are aware of at least seven patents for pausing live television. A number of companies in the enhanced-television industry earn substantial profits from technology licensing, and the introduction of new technologies such as ours is likely to provoke lawsuits from such companies. A successful claim of infringement against us, our inability to obtain an acceptable license from the holder of the patent or other right, or our inability to design around an asserted patent or other right could cause our manufacturers to cease manufacturing DVRs that enable the TiVo service, our retailers to stop selling the product or us to cease providing our service, or all of the above, which would eliminate our ability to generate revenues.

Under our agreements with many of our manufacturing and licensing partners, we are obligated to indemnify them in the event that our technology infringes upon the intellectual property rights of third parties. Due to these indemnity obligations, we could be forced to incur material expenses if our manufacturing and licensing partners are sued and if they were to lose the lawsuit, our business could be harmed. In addition, because the products sold by our manufacturing and licensing partners often involve the use of other persons’ technology, this increases our exposure to litigation in circumstances where there is a claim of infringement asserted against the product in question, even if the claim does not pertain to our technology.

Pending intellectual property litigations. On September 25, 2001, Pause Technology filed a complaint against us in the U.S. District Court for the District of Massachusetts alleging willful and deliberate infringement of U.S. Reissue Patent No. 36,801, entitled “Time Delayed Digital Video System Using Concurrent Recording and Playback.” Pause Technology alleges that it is the owner of this patent, and further alleges that we have willfully and deliberately infringed this patent by making, selling, offering to sell, and using within the United States the TiVo-enabled DVR. Pause Technology seeks unspecified monetary damages as well as an injunction against our operations. It also seeks attorneys’ fees and costs. Our answer was filed on December 26, 2001. We are incurring expenses in connection with this litigation which may become material, and in the event there is an adverse outcome, our business could be harmed. Because the lawsuit is still in the pre-trial discovery stage, we cannot determine the total expense or possible loss, if any, that may result from this litigation.

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On February 5, 2002, Sony Corporation notified us that Command Audio Corporation had filed a complaint against Sony Electronics, Inc. on February 2, 2002 in the U.S. District Court for the Northern District of California. The complaint alleges that, in connection with its sale of DVRs, Sony infringes upon two patents owned by Command Audio (U.S. Patent Nos. 5,590,195 (“Information Dissemination Using Various Transmission Modes”) and 6,330,334 (“Method and System for Information Dissemination Using Television Signals”). The complaint seeks injunctive relief, compensatory and treble damages and Command Audio’s costs and expenses, including reasonable attorneys’ fees. The case is currently scheduled for trial in March 2004. Under the terms of our agreement with Sony governing the distribution of certain DVRs that enable the TiVo service, we are required to indemnify Sony against any and all claims, damages, liabilities, costs and expenses relating to claims that our technology infringes upon intellectual property rights owned by third parties. Due to our indemnification obligations, we are incurring expenses in connection with this litigation which may become material, and, if Sony were to lose this lawsuit, our business could be harmed.

In addition, we are aware that some media companies may attempt to form organizations to develop standards and practices in the digital video recorder industry. These organizations or individual media companies may attempt to require companies in the digital video recorder industry to obtain copyright or other licenses. Lawsuits or other actions taken by these types of organizations or companies could make it more difficult for us to introduce new services, delay widespread consumer acceptance of our products and services, restrict our use of some television content, increase our costs and adversely affect our business.

If there is an adverse outcome in the class action litigation that has been filed against us, our business may be harmed.

We and certain of our officers and directors are named as defendants in a consolidated securities class action lawsuit filed in the U.S. District Court for the Southern District of New York. This action, which is captioned Wercberger v. TiVo et al., also names several of the underwriters involved in our initial public offering as defendants. This class action was brought on behalf of a purported class of purchasers of our common stock from September 30, 1999, the time of our initial public offering, through December 6, 2000. The central allegation in this action is that the underwriters in our initial public offering solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased our common stock in the initial public offering and the after-market. The complaint also alleges that the TiVo defendants violated the federal securities laws by failing to disclose in the initial public offering prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. More than 150 issuers have been named in similar lawsuits. In July 2002, an omnibus motion to dismiss all complaints against issuers and individual defendants affiliated with issuers, including the TiVo defendants, was filed by the entire group of issuer defendants in these similar actions. On October 8, 2002, our officers were dismissed as defendants in the lawsuit. On February 19, 2003, the court in this action issued its decision on defendants’ omnibus motion to dismiss. This decision dismissed the Section 10(b) claim as to TiVo but denied the motion to dismiss the Section 11 claim as to TiVo and virtually all of the other issuer-defendants.

On June 26, 2003, the plaintiffs announced a proposed settlement with us and the other issuer defendants. The proposed settlement provides that the insurers of all settling issuers will guarantee that the plaintiffs recover $1 billion from non-settling defendants, including the investment banks who acted as underwriters in those offerings. In the event that the plaintiffs do not recover $1 billion, the insurers for the settling issuers will make up the difference. Under the proposed settlement, the maximum amount that could be charged to our insurance policy in the event that the plaintiffs recovered nothing from the investment banks would be approximately $3.9 million. We believe that we have sufficient insurance coverage to cover the maximum amount that we may be responsible for under the proposed settlement. Our board of directors approved the proposed settlement at a meeting held on June 25, 2003. It is possible that the parties may not reach agreement on the final settlement documents or that the Federal District Court may not approve the settlement in whole or in part. In the event that the parties do not reach agreement on the final settlement, we believe we have meritorious defenses and intend to defend this action vigorously; however, we could be forced to incur material expenses in the litigation, and in the event there is an adverse outcome, our business could be harmed.

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Our success depends on our ability to secure and protect patents, trademarks and other proprietary rights.

Our success and ability to compete are substantially dependent upon our internally developed technology. We rely on patent, trademark and copyright law, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual proprietary rights. However, the steps we take to protect our proprietary rights may be inadequate. We have filed patent applications and provisional patent applications covering substantially all of the technology used to deliver the TiVo service and its features and functionality. To date, several of these patents have been granted, but we cannot assure you that any additional patents will ever be granted, that any issued patents will protect our intellectual property or that third parties will not challenge any issued patents. In addition, other parties may independently develop similar or competing technologies designed around any patents that may be issued to us. Our failure to secure and protect our proprietary rights could have a material adverse effect on our business.

Legislation, laws or regulations that govern the television industry, the delivery of programming and the collection of viewing information from subscriptions could expose us to legal action if we fail to comply or could require us to change our business.

The delivery of television programming and the collection of viewing information from subscriptions via the TiVo service and a DVR represents a new category in the television and home entertainment industries. As such, it is difficult to predict what laws or regulations will govern our business. Changes in the regulatory climate, the enactment of new legislation, or the expansion, enforcement or interpretation of existing laws could expose us to additional costs and expenses and could require changes to our business. For example, legislation regarding customer privacy or copyright could be enacted or expanded to apply to the TiVo service, which could adversely affect our business. New or existing copyright laws could be applied to restrict the capture of television programming, which would adversely affect our business. It is unknown whether existing laws and regulations will apply to the digital video recorder market. Therefore, it is difficult to anticipate the impact of current or future laws and regulations on our business.

The Federal Communications Commission has broad jurisdiction over the telecommunications and cable industries. The majority of FCC regulations, while not directly affecting us, do affect many of the companies on whom we substantially rely for the marketing and distribution of the DVR and the TiVo service. As such, the indirect effect of these regulations may adversely affect our business. In addition, the FCC could promulgate new regulations, or interpret existing regulations in a manner that would cause us to incur significant compliance costs or force us to alter the features or functionality of the TiVo service.

We need to safeguard the security and privacy of our subscriptions’ confidential data, and any inability to do so may harm our reputation and brand and expose us to legal action.

The DVR collects and stores viewer preferences and other data that many of our customers consider confidential. Any compromise or breach of the encryption and other security measures that we use to protect this data could harm our reputation and expose us to potential liability. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments could compromise or breach the systems we use to protect our subscriptions’ confidential information. We may be required to make significant expenditures to protect against security breaches or to remedy problems caused by any breaches.

Uncertainty in the marketplace regarding the use of data from subscriptions could reduce demand for the TiVo service and result in increased expenses. Consumers may be concerned about the use of viewing information gathered by the TiVo service and DVR. Currently, we gather anonymous information about our customers’ viewing choices while using the TiVo service, unless a customer affirmatively consents to the collection of personally identifiable viewing information. This anonymous viewing information does not identify the individual customer. Privacy concerns, however, could create uncertainty in the marketplace for digital video recording and our products and services. Changes in our privacy policy could

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reduce demand for the TiVo service, increase the cost of doing business as a result of litigation costs or increased service delivery costs, or otherwise harm our reputation and business.

In the future, our revenues and operating results may fluctuate significantly, which may adversely affect the market price of our common stock.

We expect our revenues and operating results to fluctuate significantly due to a number of factors, many of which are outside of our control. Therefore, you should not rely on period-to-period comparisons of results of operations as an indication of our future performance. It is possible that in some periods our operating results may fall below the expectations of market analysts and investors. In this event, the market price of our common stock would likely fall.

Factors that may affect our quarterly operating results include:

• demand for DVRs and the TiVo service;

• the timing and introduction of new services and features on the TiVo service;

• seasonality and other consumer and advertising trends;

• changes in revenue sharing arrangements with our strategic relationships;

• entering into new or terminating existing strategic partnerships;

• changes in the subsidy payments we make to certain strategic relationships;

• changes in our pricing policies, the pricing policies of our competitors and general pricing trends in the consumer electronics market;

• timing of revenue recognition under our licensing agreements;

• loss of subscriptions to the TiVo service; and

• general economic conditions.

Because our expenses precede associated revenues, unanticipated shortfalls in revenues could adversely affect our results of operations for any given period and cause the market price of our common stock to fall.

Seasonal trends may cause our quarterly operating results to fluctuate and our inability to forecast these trends may adversely affect the market price of our common stock.

Consumer electronic product sales have traditionally been much higher during the holiday shopping season than during other times of the year. Although predicting consumer demand for our products is very difficult, we have experienced that sales of DVRs and new subscriptions to the TiVo service have been disproportionately high during the holiday shopping season when compared to other times of the year. If we are unable to accurately forecast and respond to consumer demand for our products, our reputation and brand will suffer and the market price of our common stock would likely fall.

We expect that a portion of our future revenues will come from targeted commercials and other forms of television advertising enabled by the TiVo service. Expenditures by advertisers tend to be seasonal and cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. A decline in the economic prospects of advertisers or the

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economy in general could alter current or prospective advertisers’ spending priorities or increase the time it takes to close a sale with our advertisers, which could cause our revenues from advertisements to decline significantly in any given period.

If we are unable to raise additional capital on acceptable terms, our ability to effectively manage growth and build a strong brand could be harmed.

We expect that our existing capital resources will be sufficient to meet our cash requirements through the next twelve months. However, as we continue to grow our business, we may need to raise additional capital, which may not be available on acceptable terms or at all. If we cannot raise necessary additional capital on acceptable terms, we may not be able to develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements.

If additional capital is raised through the issuance of equity securities, the percentage ownership of our existing stockholders will decline, stockholders may experience dilution in net book value per share, or these equity securities may have rights, preferences or privileges senior to those of the holders of our common stock. Any debt financing, if available, may involve covenants limiting, or restricting our operations or future opportunities.

If we lose key management personnel, we may not be able to successfully operate our business.

Our future performance will be substantially dependent on the continued services of our senior management and other key personnel. The loss of any members of our executive management team and our inability to hire additional executive management could harm our business and results of operations. In addition, we do not have key man insurance policies for any of our key personnel.

The nature of some of our relationships may restrict our ability to operate freely in the future.

From time to time, we may engage in discussions with other parties concerning relationships, which may include equity investments by such parties in our company. We currently have such relationships with companies, including America Online, DIRECTV, Sony and Philips. While we believe that such relationships have enhanced our ability to finance and develop our business model, the terms and conditions of such relationships may place some restrictions on the operation of our business in the future.

We may be required to repurchase our outstanding convertible senior notes upon a repurchase event; however, we may not be able to do so.

Holders of our convertible senior notes may require us to repurchase all or any portion of their notes for cash upon a repurchase event, which includes certain changes in control and a failure of our shares of common stock to be listed for trading on Nasdaq or a U.S. national securities exchange. Our Silicon Valley Bank line of credit agreement may limit us, under certain circumstances, from repaying the repurchase price in cash if we have amounts borrowed against it. Additionally, future debt agreements may prohibit us from repaying the repurchase price in cash. If we are prohibited from repurchasing the notes, we could seek consent from our lenders to repurchase the notes. If we are unable to obtain their consent, we could attempt to refinance the notes. If we were unable to obtain a consent or refinance, we would be prohibited from repurchasing the notes. Even if we are not prohibited from repurchasing the notes, we may not have sufficient funds to do so. If we were unable to repurchase the notes upon a repurchase event, it would result in an event of default under the indenture governing the notes. The occurrence of an event of default under the notes could lead to the acceleration of all amounts outstanding under the notes, and may also trigger cross-default provisions resulting in the acceleration of our other then-existing debt. These events in turn could harm our share price as well as our ability to continue our operations.

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Recently enacted and proposed changes in securities laws and regulations are likely to increase our costs and may affect our ability to be in compliance with such new corporate governance provisions in the future.

The existing federal securities laws and regulations impose complex and continually changing regulatory requirements on our operations and reporting. With the enactment of the Sarbanes-Oxley Act of 2002 in July 2002, a significant number of new corporate governance requirements have been adopted or proposed. The new requirements impose comprehensive reporting and disclosure requirements, set stricter independence and financial expertise standards for audit committee members and impose increased civil and criminal penalties for companies, their chief executive officers, chief financial officers and directors for securities law violations. We expect these developments to increase our legal compliance costs, increase the difficulty and expense in obtaining director and officer liability insurance, and make it harder for us to attract and retain qualified members of our board of directors and/or qualified executive officers. Such developments could harm our results of operations and divert management’s attention from business operations. We may not be successful in complying with these requirements at all times.

The current legislative and regulatory environment affecting accounting principles generally accepted in the United States of America is uncertain and volatile, and significant changes in current principles could affect our financial statements going forward.

The accounting rules and regulations that we must comply with are complex and continually changing. Recent actions and public comments from the Securities Exchange Commission have focused on the integrity of financial reporting generally. Similarly, the U.S. Congress has considered a variety of bills that could affect certain accounting principles. The FASB has recently introduced several new or proposed accounting standards, or are developing new proposed standards, such as accounting for guarantees, restructuring charges and stock options, some of which would represent a significant change from current industry practices. In addition, many companies’ accounting policies are being subject to heightened scrutiny by regulators and the public. While we believe that our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, we cannot predict the impact of future changes to accounting principals or our accounting policies on our financial statements going forward. In addition, were we to change our critical accounting estimates, including with respect to the recognition of revenue from our lifetime subscriptions, our results of operations could be significantly impacted.

Our former independent public accountant, Arthur Andersen LLP, has been found guilty of federal obstruction of justice charges and you are unlikely to be able to exercise effective remedies against them in any legal action.

Although we have dismissed Arthur Andersen as our independent public accountants and engaged KPMG LLP, our consolidated financial statements as of and for the one-month transition period ended January 31, 2001, and the fiscal year ended December 31, 2000 have only been audited by Arthur Andersen. On March 14, 2002, Arthur Andersen was indicted on federal obstruction of justice charges arising from the government’s investigation of Enron Corporation. On June 15, 2002, a jury in Houston, Texas found Arthur Andersen guilty of these federal obstruction of justice charges. On October 16, 2002, Arthur Andersen was sentenced to five years probation and fined $500,000 as a result. In light of the jury verdict and the underlying events, Arthur Andersen informed the Securities and Exchange Commission that it would cease practicing before the Securities and Exchange Commission by August 31, 2002, unless the Securities and Exchange Commission determines another date is appropriate. A spokesperson for Arthur Andersen announced that, as of August 31, 2002, Arthur Andersen voluntarily relinquished, or consented to revocation of, its firm permits in all states where it was licensed to practice public accountancy with state regulators. Substantially all of Arthur Andersen’s personnel have left the firm, including the individuals responsible for auditing our audited financial statements described above. Accordingly, you are unlikely to be able to exercise effective remedies or collect judgments against them.

In addition, in connection with the re-audit by KPMG LLP of our fiscal year 2002 financial statements and the resulting restatement of such financial statements, Arthur Andersen has informed us that it has withdrawn its audit report dated March 28, 2002. In our financial statements attached to our annual report on Form 10-K, we included a copy of the

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audit report of Arthur Andersen dated March 2, 2001 included in our transition report on Form 10-K/T filed on April 30, 2001 without Arthur Andersen’s consent in reliance on Rule 2-02(e) of Regulation S-X. Because Arthur Andersen has not consented to the inclusion of their audit report dated March 2, 2001 in our annual report on Form 10-K and has withdrawn its audit report dated March 28, 2002, investors’ ability to recover against Arthur Andersen with respect to the financial statements included in our annual report on Form 10-K may be limited.

Moreover, as a public company, we are required to file with the Securities and Exchange Commission periodic financial statements audited or reviewed by an independent public accountant. The Securities and Exchange Commission has said that it will continue accepting financial statements audited by Arthur Andersen so long as a reasonable effort is made to have Arthur Andersen reissue its audit reports and to obtain a manually signed audit report from Arthur Andersen. Arthur Andersen has informed us that it is no longer able to reissue its audit reports because both the partner and the audit manager who were assigned to our account have left the firm. In addition, Arthur Andersen is unable to perform procedures to assure the continued accuracy of its audit report on our audited financial statements included in our annual report on Form 10-K. Arthur Andersen will also be unable to perform such procedures or to provide other information or documents that would customarily be received by us or underwriters in connection with financings or other transactions, including consents and “comfort” letters. As a result, we may encounter delays, additional expense and other difficulties in future financings. Any resulting delay in accessing or inability to access the public capital markets could have a material adverse effect on us.

The large number of shares available for future sale could adversely affect the market price for our stock.

Sales of a substantial number of shares of our common stock in the public market or the perception that such sales might occur could adversely affect the market price of our common stock.

Several of our significant stockholders own a substantial number of our shares. As of October 31, 2003 AOL owned 6,726,890 shares of our common stock and presently exercisable warrants to purchase an additional 295,428 shares of our common stock. On October 31, 2003 AOL also held unvested warrants to purchase an aggregate of 5,207,806 shares of our common stock, which pursuant to their terms can never be exercisable. As of May 16, 2003 Hughes Electronics Corporation owned 3,386,601 shares of our common stock and presently exercisable warrants to purchase an additional 155,941 shares. We have granted Hughes demand and piggyback registration rights with respect to the shares issuable upon exercise of their warrants and Hughes may sell their shares in registered offerings pursuant to their registration rights, and AOL and Hughes may sell their shares in accordance with Rule 144 under the Securities Act.

In addition, in August 2001, we issued $51.8 million aggregate principal amount of our convertible senior notes due 2006, of which, as of October 31, 2003, there was $20.5 million in principal amount still outstanding. As of October 31, 2003, these notes were convertible into a maximum of 5,125,313 shares of our common stock. In connection with the convertible notes offering, we also issued five-year warrants to purchase 2,682,600 shares of our common stock, all of which were still outstanding as of October 31, 2003. Pursuant to registration rights agreements with the investors in that offering, we have registered the resale of the convertible notes, warrants and shares of common stock issuable upon conversion or exercise of the convertible notes or warrants.

As of October 31, 2003, options to purchase a total of 13,045,274 shares were outstanding under our option and equity incentive plans, and there were 7,613,370 shares available for future grants. We have filed registration statements with respect to the shares of common stock issuable under our option and equity incentive plans.

Future sales of the shares of the common stock described above, or the registration for sale of such common stock, could adversely affect the market price of our common stock. The sale of such stock, as well as the existence of outstanding options and shares of common stock reserved for issuance under our option and equity incentive plans, as well as the shares issuable upon conversion or exercise of our outstanding convertible notes and warrants, also may adversely affect the terms upon which we are able to obtain additional capital through the sale of equity securities.

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We may issue common stock to satisfy our current or future cash payment obligations or otherwise and as a result of such issuances, common stockholders may experience immediate dilution and our stock price may go down.

We amended our agreements with Thomson Multimedia and BSkyB in order to enable us to issue common stock to reduce or eliminate some of our cash payment obligations to them. As a result of these amendments, in July 2002, we issued 633,072 shares and 379,843 shares to BSkyB and Thomson Multimedia, respectively. Under our agreement with Thomson Multimedia, we can continue to satisfy future cash payment obligations, in part, in shares of common stock. We may negotiate similar amendments to our agreements with other customers in order to reduce our cash payment obligations in the future. In addition, we may choose to issue stock in lieu of paying cash for other purposes, including for the acquisition of technology, property or other businesses.

We expect to continue to experience volatility in our stock price.

The market price of our common stock is highly volatile. Since our initial public offering in September 1999 through December 5, 2003, our common stock has closed between $71.50 per share and $2.55 per share, closing at $6.48 on December 5, 2003. The market price of our common stock may be subject to significant fluctuations in response to, among other things, the factors discussed in this section and the following factors:

• Changes in estimates of our financial performance or changes in recommendations by securities analysts;

• Our failure to meet, or our ability to exceed, the expectations of securities analysts or investors;

• Release of new or enhanced products or introduction of new marketing initiatives by us or our competitors;

• Announcements by us or our competitors of the creation, developments under or termination of significant strategic relationships, joint ventures, significant contracts or acquisitions;

• Fluctuations in the market prices generally for technology and media-related stocks;

• Fluctuations in general economic conditions;

• Fluctuations in interest rates;

• Market conditions affecting the television and home entertainment industry and the technology sector;

• Fluctuations in operating results; and

• Additions or departures of key personnel.

The stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock.

Our Certificate of Incorporation, Bylaws, Rights Agreement and Delaware law could discourage a third party from acquiring us and consequently decrease the market value of our common stock.

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We may become the subject of an unsolicited attempted takeover of our company. Although an unsolicited takeover could be in the best interests of our stockholders, certain provisions of Delaware law, our organizational documents and our Rights Agreement could be impediments to such a takeover.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, the statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Our Amended and Restated Certificate of Incorporation and Bylaws also require that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of the stockholders and may not be effected by a consent in writing. In addition, special meetings of our stockholders may be called only by a majority of the total number of authorized directors, the chairman of the board, our chief executive officer or the holders of 50% or more of our common stock. Our Amended and Restated Certificate of Incorporation and Bylaws also provide that directors may be removed only for cause by a vote of a majority of the stockholders and that vacancies on the board of directors created either by resignation, death, disqualification, removal or by an increase in the size of the board of directors may be filled by a majority of the directors in office, although less than a quorum. Our Amended and Restated Certificate of Incorporation also provides for a classified board of directors and specifies that the authorized number of directors may be changed only by resolution of the board of directors.

On January 9, 2001, our board of directors adopted a Rights Agreement. Each share of our common stock has attached to it a right to purchase one one-hundredth of a share of our Series B Junior Participating Preferred Stock at a price of $60 per one one-hundredth of a preferred share. Subject to limited exceptions, the rights will become exercisable following the tenth day after a person or group announces the acquisition of 15% or more (or 30.01% or more in the case of America Online, Inc. and its affiliates and associates until such time as America Online and its affiliates and associates cease to beneficially own any common shares) of our common stock, and thereby becomes an “acquiring person,” or announces commencement of a tender offer or exchange offer, the consummation of which would result in the ownership by the person or group of 15% or more (or 30.01% or more in the case of America Online and its affiliates and associates until such time as America Online and its affiliates and associates cease to beneficially own any common shares) of our common stock. The rights are not exercisable as of August 4, 2003. We will be entitled to redeem the rights at $0.01 per right at any time prior to the time that a person or group becomes an acquiring person.

These provisions of Delaware law, our Amended and Restated Certificate of Incorporation and Bylaws and our Rights Agreement could make it more difficult for us to be acquired by another company, even if our acquisition is in the best interests of our stockholders. Any delay or prevention of a change of control or change in management could cause the market price of our common stock to decline.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, without limitation, statements regarding our anticipated financial results, revenues, subscriptions, use of funds and business plan. You can recognize forward-looking statements by use of the words “believes,” “anticipates,” “expects,” and words of similar import or the negative of those terms or expressions. Such forward-looking statements will have known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual results could differ materially from those set forth in such forward-looking statements as a result of the “Factors That May Affect Future Operating Results” and other risks detailed in our reports filed with the Securities and Exchange Commission subsequent to the date of the original filing of this quarterly report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We do not use derivative financial instruments in our investment portfolio and we conduct transactions in U.S. dollars. Our investment portfolio only includes highly liquid instruments with original maturities of less than one year.

We are subject to fluctuating interest rates that may impact, adversely or otherwise, our results of operations or cash flows for our cash and cash equivalents and our short-term investments.

The table below presents principal amounts and related weighted average interest rates as of October 31, 2003 for our cash and cash equivalents. We had no short-term investments at this time.

Cash and cash equivalents (in thousands)	$	61,807
Average interest rate		1.08	%

Although payments under the operating lease for our facility are tied to market indices, we are not exposed to material interest rate risk associated with the operating lease.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter covered by this report. Based upon the foregoing, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective in reaching a level of reasonable assurance in achieving our desired control objectives.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II : OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

IPO Litigation. We and certain of our officers and directors are named as defendants in a consolidated securities class action lawsuit filed in the U.S. District Court for the Southern District of New York. This action, which is captioned Wercberger v. TiVo et al., also names several of the underwriters involved in our initial public offering as defendants. This class action is brought on behalf of a purported class of purchasers of our common stock from September 30, 1999, the time of our initial public offering, through December 6, 2000. The central allegation in this action is that the underwriters in our initial public offering solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased our common stock in the initial public offering and the after-market. The complaint also alleges that the TiVo defendants violated the federal securities laws by failing to disclose in the initial public offering

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prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. More than 150 issuers have been named in similar lawsuits. In July 2002, an omnibus motion to dismiss all complaints against issuers and individual defendants affiliated with issuers (including the TiVo defendants) was filed by the entire group of issuer defendants in these similar actions. On October 8, 2002, our officers were dismissed as defendants in the lawsuit. On February 19, 2003, the court in this action issued its decision on defendants’ omnibus motion to dismiss. This decision dismissed the Section 10(b) claim as to TiVo but denied the motion to dismiss the Section 11 claim as to TiVo and virtually all of the other issuer-defendants.

On June 26, 2003, the plaintiffs announced a proposed settlement with us and the other issuer defendants. The proposed settlement provides that the insurers of all settling issuers will guarantee that the plaintiffs recover $1 billion from non-settling defendants, including the investment banks who acted as underwriters in those offerings. In the event that the plaintiffs do not recover $1 billion, the insurers for the settling issuers will make up the difference. Under the proposed settlement, the maximum amount that could be charged to our insurance policy in the event that the plaintiffs recovered nothing from the investment banks would be approximately $3.9 million. We believe that we have sufficient insurance coverage to cover the maximum amount that we may be responsible for under the proposed settlement. Our board of directors approved the proposed settlement at a meeting held on June 25, 2003. It is possible that the parties may not reach agreement on the final settlement documents or that the Federal District Court may not approve the settlement in whole or part. In the event that the parties do not reach agreement on the final settlement, we believe we have meritorious defenses and intend to defend this action vigorously; however, we could be forced to incur material expenses in the litigation, and in the event there is an adverse outcome, our business could be harmed.

Pause Technology LLC. On September 25, 2001, Pause Technology filed a complaint against us in the U.S. District Court for the District of Massachusetts alleging infringement of U.S. Reissue Patent No. 36,801, entitled “Time Delayed Digital Video System Using Concurrent Recording and Playback”. Pause Technology alleges that it is the owner of this patent, and further alleges that we have willfully and deliberately infringed this patent by making, selling, offering to sell, and using within the United States the TiVo digital video recorder. Pause Technology seeks unspecified monetary damages as well as an injunction against our operations. It also seeks attorneys’ fees and costs. Our answer was filed on December 26, 2001. We believe we have meritorious defenses and intend to defend this action vigorously; however we are incurring expenses in connection with this litigation which may become material and in the event there is an adverse outcome, our business could be harmed.

Indemnification of Sony Corporation Against Command Audio Corporation Lawsuit. On February 5, 2002, Sony Corporation notified us that Command Audio Corporation had filed a complaint against Sony Electronics, Inc. on February 2, 2002 in the U.S. District Court for the Northern District of California. The complaint alleges that, in connection with its sale of digital video recorders and other products, Sony infringes upon two patents owned by Command Audio (U.S. Patent Nos. 5,590,195 (“Information Dissemination Using Various Transmission Modes”) and 6,330,334 (“Method and System for Information Dissemination Using Television Signals”). The complaint seeks injunctive relief, compensatory and treble damages and Command Audio’s costs and expenses, including reasonable attorneys’ fees. The case is currently scheduled for trial in March 2004. Under the terms of our agreement with Sony governing the distribution of certain DVRs that enable the TiVo service, we are required to indemnify Sony against any and all claims, damages, liabilities, costs and expenses relating to claims that our technology infringes upon intellectual property rights owned by third parties. We believe Sony has meritorious defenses against this lawsuit; however, due to our indemnification obligations, we are incurring expenses in connection with this litigation which may become material, and, if Sony were to lose this lawsuit, our business could be harmed.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Stockholders of TiVo Inc. was held at the offices of Latham & Watkins LLP, 135 Commonwealth Drive, Menlo Park, California on August 6, 2003. Out of 64,917,946 shares of Common Stock (as of the record date of June 13, 2003) entitled to vote at the meeting 45,714,784 shares were present in person or by proxy.

The vote for nominated directors, to serve until the 2006 Annual Meeting of Stockholders, and until their successors are elected, was as follows:

NOMINEE	IN FAVOR	WITHHELD
Randy Komisar	41,259,904	4,454,880
Michael Ramsay	45,157,458	557,326
Geoffrey Y. Yang	45,029,795	684,989

The results of voting on the ratification of the selection of KPMG LLP as independent auditors for the Company for the fiscal year ending January 31, 2004, were as follows:

IN FAVOR	OPPOSED	ABSTAIN
45,607,035	88,837	18,912

ITEM 5. OTHER INFORMATION

DIRECTV Agreements

During the quarter ended October 31, 2003, we entered into the following two agreements with DIRECTV: The Second Consolidated Amendment to Marketing Agreement, dated as of June 30, 2003 and Amendment No. 1 to the Services Agreement, dated as of October 3, 2003. Both amendments revise provisions relating to, among other things, the amount, timing and duration of revenue share payments made by us to DIRECTV for each subscription from integrated DIRECTV satellite receivers with TiVo service.

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ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) EXHIBITS

EXHIBIT NUMBER	DESCRIPTION
10.1	Second Consolidated Amendment to Marketing Agreement, dated as of June 30, 2003, between TiVo Inc. and DIRECTV, Inc. (filed herewith).
+ 10.2	Amendment No. 1 to the Services Agreement, dated as of October 3, 2003, between TiVo Inc. and DIRECTV, Inc. (filed herewith).
31.1	Certification of Michael Ramsay, Chairman of the Board of Directors and Chief Executive Officer of TiVo Inc. dated December 15, 2003 in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of David H. Courtney, Executive Vice President and Chief Financial Officer of TiVo Inc. dated December 15, 2003 in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Michael Ramsay, Chairman of the Board of Directors and Chief Executive Officer of TiVo Inc. dated December 15, 2003 in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of David H. Courtney, Executive Vice President and Chief Financial Officer of TiVo Inc. dated December 15, 2003 in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ Confidential treatment has been requested as to portions of this exhibit.

(b) REPORTS ON FORM 8-K

The registrant filed the following reports on Form 8-K during the quarter ended October 31, 2003:

• Current Report on Form 8-K on August 21, 2003, regarding furnishing press release of our earnings for the second quarter ended July 31, 2003.

• Current Report on Form 8-K on August 26, 2003 regarding announcement of our earnings for the second quarter ended July 31, 2003.

Subsequent to October 31, 2003, the registrant filed the following reports on Form 8-K:

• Current Report on Form 8-K on November 4, 2003, regarding announcement that we had surpassed the one million subscription milestone.

• Current Report on Form 8-K on November 20, 2003, regarding furnishing press release of our earnings for the third quarter ended October 31, 2003.

• Current Report on Form 8-K on November 20, 2003 regarding announcement of our earnings for the third quarter ended October 31, 2003.

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Trademark Acknowledgments

Can’t Miss TV”, “Ipreview”, Jump logo, “Personal Video Recorder”, TiVo, TiVo (logo and character), “TiVo and Smile Design”, TiVo Central, TiVolution, “TiVoMatic”, and “What you want, when you want it” are registered trademarks of TiVo Inc.

“Active Preview”, “DIRECTIVO”, Home Media Option, Instant Replay logo, “Life’s too short for bad TV”, “Overtime Scheduler”, “Personal TV”, “Primetime Anytime”, “Season Pass”, “See it, want it, get it”, “Thumbs Down” (logo and text), “Thumbs Up” (logo and text), TiVo Series2 (logo and text), “TiVo, TV Your Way”, TrickPlay”, and “WishList” are trademarks of TiVo Inc. All other trademarks or trade names appearing in this report are the property of their respective owners.

SIGNATURES

Pursuant to the requirements the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TIVO INC.
Date: December 15, 2003	By:	/s/ Michael Ramsay
		Michael Ramsay Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

Date: December 15, 2003	By:	/s/ David H. Courtney
		David H. Courtney Chief Financial Officer and Executive Vice President of Worldwide Operations and Administration (Principal Financial and Accounting Officer)

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EX-10.1

EXHIBIT 10.1

CONFIDENTIAL

SECOND CONSOLIDATED AMENDMENT TO MARKETING AGREEMENT

This SECOND CONSOLIDATED AMENDMENT TO THE MARKETING AGREEMENT (this “Second Amendment”) is made and entered into as of June 30, 2003 (the “Second Amendment Effective Date”) by and between DIRECTV, INC., a California corporation (“DIRECTV”), and TIVO INC., a Delaware corporation (“TiVo”) (collectively, the “Parties”).

RECITALS

WHEREAS, the Parties entered into that certain Marketing Agreement having an effective date of April 13, 1999 (the “Marketing Agreement”);

WHEREAS, the Parties have previously clarified the Marketing Agreement via letter agreements dated September 28, 2001 (the “September 2001 Letter Agreement”) and January 7, 2002 (the “January 2002 Letter Agreement”);

WHEREAS, the Parties have previously amended the Marketing Agreement via that certain Amendment to Marketing Agreement and Tax Agreement dated February 15, 2002 (the “First Amendment”), which incorporated some of the clarifications of the September 2001 Letter Agreement relevant to the Marketing Agreement and all of the clarifications of the January 2002 Letter Agreement relevant to the Marketing Agreement; and

WHEREAS, the Parties wish to set forth the prior clarifications of the September 2001 Letter Agreement relevant to the Marketing Agreement herein, and further amend certain provisions in the Marketing Agreement.

NOW, THEREFORE, the Parties agree as follows:

AGREEMENT

Unless stated otherwise, capitalized terms used herein shall have the meanings set forth in the Marketing Agreement.

1.    PERMANENT REVENUE SHARE FOR TIVO STAND-ALONE RECEIVER.    The last sentence of Section 4.1.2 of the Marketing Agreement is deleted and replaced in its entirety with the following:

“ “Stand-Alone Revenue Attributable to DIRECTV” shall be defined as, for any particular month, an amount equal to the total subscription revenue received by TiVo during such month for subscription fees paid for the TiVo Service (including all subscription fees received for subscription to the TiVo Service for terms longer than one (1) month) for all DIRECTV/TiVo Subscribers utilizing the TiVo Stand-Alone Receiver (as determined by the number of TiVo Stand-Alone Receivers which “self-report” the use of a DIRECTV head-end during TiVo Service set-up) that have activated the TiVo Service on or prior to June 30, 2003. For the sake of clarity, Stand-Alone Revenue Attributable to DIRECTV shall not include any revenues received by

1

CONFIDENTIAL

TiVo from DIRECTV/TiVo Subscribers utilizing the TiVo Stand-Alone Receiver that activate any TiVo Service subscription, or initiate use of a DIRECTV head-end, on or after July 1, 2003.”

2.    FIRST AMENDMENT CORRECTION.    The Parties acknowledge and agree that the reference to “Section 2.2(e)” in Section I.D.2 of the First Amendment is incorrect and that Section 3.0 of the Marketing Agreement has been superceded and replaced by Section 2.3(d) of that certain Services Agreement by and between the Parties dated February 15, 2002.

3.    CONFIRMATION OF TERMINATION OF CERTAIN PROVISIONS.    The Parties confirm that the provisions of Sections 4.1.3 and 4.3 of the Marketing Agreement were terminated on the date of the First Amendment.

4.    RIGHT OF REPURCHASE.    The Parties acknowledge and agree that TiVo’s Right of Repurchase under Section 5.2 of the Marketing Agreement has terminated.

5.    NOTICES.    Section 12.6 of the Marketing Agreement and Section 10.5 of Schedule 2.5(a) of the Marketing Agreement are each amended by deleting the notice information pertinent to TiVo and replacing it with the following:

“TIVO

TiVo Inc.

2160 Gold Street

Alviso CA 95002

ATTN: CEO

Fax: (408) 519-5333

cc: General Counsel”

6.    EFFECT OF AMENDMENT.    Except as expressly modified herein, all other terms and conditions of the Marketing Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, TiVo and DIRECTV have duly executed this Second Amendment by their respective duly authorized officers. This Second Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same original.

TIVO INC.		DIRECTV, INC.
By:	/s/ Edward Lichty	By:	/s/ S.A. Campbell

Printed Name: Edward Lichty Printed Name: S.A. Campbell

Title: VP, Business Development Title: Sr. VP, Programming

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EX-10.2

EXHIBIT 10.2

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

FIRST AMENDMENT TO SERVICES AGREEMENT

This FIRST AMENDMENT TO THE SERVICES AGREEMENT (this “First Amendment”) is made and entered into as of October 3, 2003 (the “First Amendment Effective Date”) by and between DIRECTV, INC., a California corporation (“DIRECTV”), and TIVO INC., a Delaware corporation (“TiVo”) (collectively, the “Parties”).

RECITALS

WHEREAS, the Parties entered into that certain Services Agreement having an effective date of February 15, 2002 (the “Services Agreement”); and

WHEREAS, the Parties wish to modify certain provisions in the Services Agreement as explicitly set forth in this First Amendment.

NOW, THEREFORE, the Parties agree to amend the Services Agreement as follows:

AGREEMENT

Unless stated otherwise, capitalized terms used herein shall have the meanings set forth in the Services Agreement.

1. DIRECTV’S USE OF TIVOVISION. Section 2.3(a) of the Services Agreement is hereby deleted and replaced in its entirety with the following:

“(a) DIRECTV’s TiVoVision Use. DIRECTV shall have the [*]right to use the TiVoVision functionality solely and exclusively on DIRECTV DVR Receivers to provide and/or promote DIRECTV Products and Services (such use, “DIRECTV’s TiVoVision Use”). “DIRECTV Products and Services” shall be defined as (i) any [*] product [*]associated with the delivery, receipt or use of the DIRECTV Service (a “DIRECTV Product”), (ii) any [*]made available via the DIRECTV Service during the Term (regardless of whether such [*]is [*]by [*]or [*]), and any [*]related to DIRECTV Services and DIRECTV offerings, (iii) any [*]whose primary purpose is other than to [*], and (iv) communications, information, instruction, troubleshooting and other customer services relating to the purchase, installation or use of a DIRECTV Product or the DIRECTV Service (including the DIRECTV DVR service). For purposes of clarification and not limitation, clause (ii) above includes, among other things, [*]in association with a DIRECTV Service [*], the provision or promotion of [*] (such as [*]) and/or [*]

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

associated with a [*]featured in DIRECTV Service programming, and the promotion of [*] and associated merchandise related to or offered in association with [*]available on the DIRECTV Service. Notwithstanding the foregoing, if TiVo desires to undertake a use of the TiVoVision Functionality with respect solely to the provision or promotion of any proposed individual (a) [*], (b) [*], or (c) [*], TiVo shall request DIRECTV’s approval to permit such use and such request may be via email. Such approval shall not be unreasonably withheld or delayed by DIRECTV and in any event shall be given or denied within [*]from the date requested by TiVo, and approval will be deemed given if approval does not occur within such [*]of receipt of TiVo’s request by DIRECTV’s designated project manager, which as of the First Amendment Effective Date, is [*]; provided, however, that it shall not be deemed unreasonable for DIRECTV to deny such approval if DIRECTV reasonably believes the TiVoVision Functionality use by TiVo will conflict with DIRECTV’s current contractual obligations to [*] (such as [*]). It is the Parties’ intent to avoid the situation where there are two concurrent Showcases related to substantially the same [*]; accordingly, DIRECTV shall use commercially reasonable efforts to provide TiVo advance notice of planned DIRECTV-authored Showcases that could otherwise be duplicative of potential TiVo-authored Showcases described in this Section 2.3(a). [*]any revenue actually received by DIRECTV resulting from DIRECTV’s TiVoVision Use other than as set forth in Section 2.3(b) [*]. [*]any Shared Revenue actually received by TiVo resulting from TiVo’s use of TiVoVision functionality approved by DIRECTV in accordance with this Section 2.3(a) [*], and such use shall be included in the definition of TiVo’s TiVoVision use.”

2. TIVO’S USE OF TIVOVISION. Section 2.3(b) of the Services Agreement is hereby deleted and replaced in its entirety with the following:

“(b) TiVo’s TiVoVision Use. Except for the rights granted to DIRECTV as set forth in Section 2.3(a) (DIRECTV’s TiVoVision Use), TiVo shall have the right to use, display, perform, market, sell, distribute and make available the TiVoVision functionality to end users of the Stand Alone Receiver and the DIRECTV DVR Receivers and any other third parties (including, without limitation, any other pay television or cable network operators (“TiVo’s TiVoVision Use”). For purposes of clarification and not limitation, it is expressly understood that the use of TiVoVision Functionality to [*]shall be included in the scope of TiVo’s TiVoVision Use. Notwithstanding the foregoing, if DIRECTV desires to undertake a use of the TiVoVision Functionality with respect solely to a

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

2

[*], DIRECTV shall request TiVo’s approval to permit such use, [*], and such request may be via email. Such approval shall not be unreasonably withheld or delayed by TiVo and in any event shall be given or denied within [*]from the date requested by DIRECTV, and approval will be deemed given if approval does not occur within such [*]of receipt of DIRECTV’s request by TiVo’s designated project manager, which as of the First Amendment Effective Date, is [*]; provided, however, that it shall not be deemed unreasonable for TiVo to deny such approval if TiVo reasonably believes the TiVoVision Functionality use by DIRECTV will conflict with TiVo’s current contractual obligations to [*] (such as [*]) or if [*]. It is the Parties’ intent to avoid the situation where there are two concurrent Showcases related to substantially the same [*]; accordingly, TiVo shall use commercially reasonable efforts to provide DIRECTV advance notice of planned TiVo-authored Showcases for [*]that could otherwise be duplicative of potential DIRECTV-authored Showcases described in this Section 2.3(b). [*]any Shared Revenue actually received by TiVo resulting from TiVo’s TiVoVision Use (the “Section 2.3(b) Shared Revenue”) [*]. [*]any revenue actually received by TiVo resulting from TiVo’s TiVoVision Use other than as set forth above in Section 2.3(a) and in this Section 2.3(b) [*]. [*]any Shared Revenue actually received by DIRECTV resulting from DIRECTV’s use of TiVoVision functionality for [*]approved by TiVo in accordance with this Section 2.3(b) [*], and such use shall be included in the definition of DIRECTV’s TiVoVision use.”

3. TIVO’S HARD DISK ALLOCATION. Section 2.3(c) of the Services Agreement is hereby deleted in its entirety and replaced by the following:

“(c) TiVo’s Hard Disk Allocation. The allocation by DIRECTV of hard disk capacity in each DIRECTV DVR Receiver for TiVo’s TiVoVision Use shall be referred to as the “TiVo Hard Disk Allocation.”

(i) Hard Disk Capacity Less Than or Equal to [*]GB. The TiVo Hard Disk Allocation shall be, and DIRECTV shall allocate, at least [*]in each DIRECTV DVR Receiver when the total hard disk capacity of each such receiver is less than or equal to [*]gigabytes.

(ii) Hard Disk Capacity Greater than [*]GB and Less Than [*]GB. The TiVo Hard Disk Allocation shall be, and DIRECTV shall allocate, at least [*]of hard disk capacity in each DIRECTV DVR Receiver when the total hard disk capacity of each such receiver is greater than [*]gigabytes and less than [*]gigabytes.

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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(iii) Hard Disk Capacity Greater Than or Equal to [*]GB. For any DIRECTV DVR Receiver with a hard disk capacity equal to or greater than [*]gigabytes (an “[*]GB Receiver”), the TiVo Hard Disk Allocation shall be, and DIRECTV shall allocate at least [*]. If the Section 2.3(b) Shared Revenue is between [*]and [*] (inclusive) per DIRECTV subscriber with at least [*]DVR Receiver[*] (each, a “DIRECTV DVR Subscriber”) during each [*]for [*]calendar [*], then the TiVo Hard Disk Allocation shall be [*]to, and DIRECTV shall within [*]days thereof allocate, [*]in all [*]GB Receivers, continuing throughout the Term; provided, however, that if the Section 2.3(b) Shared Revenue is subsequently [*]than [*]per DIRECTV DVR Subscriber during each [*]for [*]calendar [*]then, within [*]days thereof, the TiVo Hard Disk Allocation for [*]GB Receivers shall [*]to [*]. In addition, if the Section 2.3(b) Shared Revenue equals or exceeds [*]per DIRECTV DVR Subscriber each [*]for [*]calendar [*], then the TiVo Hard Disk Allocation shall be [*]to, and DIRECTV shall within [*]days thereof allocate, [*]in all [*]GB Receivers, continuing throughout the Term; provided, however, that if the Section 2.3(b) Shared Revenue is subsequently [*]than [*]per DIRECTV DVR Subscriber each [*]for [*]calendar [*]then, within [*]days thereof, the TiVo Hard Disk Allocation for [*]GB Receivers shall [*]to [*] (or [*], in the case where the Section 2.3(b) Shared Revenue is [*]than [*]per DIRECTV DVR Subscriber each [*]for [*] calendar [*]). The foregoing provisions providing for [*]in the TiVo Hard Disk Allocation shall [*]after the TiVo Hard Disk Allocation has been [*]pursuant to such provisions (i.e., the TiVo Hard Disk Allocation shall not [*]to either [*]or [*]once it has been [*]pursuant to the foregoing provisions of this item 2.3(c)(iii)).

(iv) Tracking Processes. The parties shall work together in good faith to develop, within sixty (60) days following the First Amendment Effective Date, and manage throughout the Term, a process whereby both parties are able to track the status of network hard disk capacity in fielded DIRECTV DVR Receivers in order to assist the reliable delivery and capture of content. Such process shall be used in connection with the management of TiVo’s Hard Disk Allocation as described in this Section 2.3(c).”

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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4. VERSIONS [*]AND [*]SOFTWARE TIVOVISION GRID PLACEMENT. A new Section 2.3(e) is hereby added to the Services Agreement, to read as follows:

“(e) Versions [*]and [*]Software TiVoVision Grid Placement. During the operation of Versions [*]and [*]Software only, with respect to the “Showcase” grid of DIRECTV DVR Receivers, the Parties agree as follows:

DIRECTV shall be entitled to use no fewer than [*]cells [*], within the [*]rows (each row is comprised of four cells), and TiVo shall be entitled to use no fewer than [*]cells [*], within the [*]row. If DIRECTV requires more than the [*]cells [*], DIRECTV shall use as many cells as necessary in the [*]rows [*]. If TiVo requires more than the [*]cells [*]and DIRECTV has occupied the [*]rows [*]and no more, TiVo shall use the cells in the [*]row [*]for each additional cell required. If TiVo requires more than [*] cells [*]and DIRECTV has occupied the [*]cells [*] and additional cells [*], TiVo shall use the [*]cells [*]the cells used by DIRECTV [*]. If DIRECTV is using less than the [*]cells [*], TiVo’s cells will move up such that TiVo’s cells will start immediately [*]DIRECTV’s last used cell. If TiVo is using less than the [*]cells [*]and DIRECTV requires more than the [*]cells [*], DIRECTV shall use the [*]cells in the [*]row, provided, however, that TiVo’s used cells are all [*]. For purposes of this Section 2.3(e), the “[*]” refers to the [*].”

5. TIVO’S USE OF USER DATA. The second sentence of Section 3.2 of the Services Agreement is hereby deleted in its entirety and replaced by the following:

“Notwithstanding the foregoing, DIRECTV acknowledges and agrees that TiVo shall have the right to continue and/or to negotiate and enter into agreements (with such agreements to last no longer than [*]) with the [*]solely with respect to [*]programming on DIRECTV DVR Receivers, including [*], subject to the following conditions and the approval of such conditions by [*]: (i) any Shared Revenue resulting from the [*]; (ii) DIRECTV shall [*]; (iii) DIRECTV shall [*]any [*]delivered to [*]under the [*]; (iv) all such [*]shall be in accordance with the current DIRECTV Privacy Policy for DIRECTV DVR Receivers, (v) DIRECTV shall [*]in any [*]between [*]; and (vi) DIRECTV shall [*] and [*]any renewal or expansion of the [*].”

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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6. LICENSE RENEWAL; PRORATED FEES. The last sentence of Section 6.1(b) of the Services Agreement is hereby deleted in its entirety and replaced by the following:

“For the avoidance of doubt, in no event will Sections 2.3(c), 2.3(d) or TiVo’s rights to use the User Data set forth in Sections 3.1 and 3.2 survive the initial 3 year term set forth in Section 12.1 unless: (i) the parties have agreed to extend the Term of this Agreement as provided for in said Section 12.1; or (ii) solely with respect to TiVo’s rights to use the User Data set forth in Sections 3.1 and 3.2, TiVo has on-going reporting obligations pursuant to Section 6.6(e), but solely to the extent necessary to fulfill such reporting obligations.”

7. TECHNICAL SUPPORT. Section 6.1(c) of the Services Agreement is amended to add the following at the end of such Section:

“In furtherance and not in limitation of the foregoing, TiVo shall provide sufficient technical assistance regarding the Authoring Tools so that (1) within [*]of notice from DIRECTV regarding a problem or issue with the Authoring Tools, the appropriate TiVo personnel are available to meet (in person or by phone, as appropriate) with DIRECTV to discuss in detail and provide initial evaluation of the problem or issue and (2) TiVo shall further evaluate and define the scope of the issue or problem and use commercially reasonable efforts to provide potential solutions thereto within [*]after such initial meeting.”

8. SHOWCASE PUBLISHING STATUS REPORTS. A new Section 6.5 is added to the Services Agreement to read as follows:

“6.5 Publishing Instruction Report; Showcase Publishing Status Reports.

(a) Showcase Publishing Instruction Report. Commencing no later than [*], DIRECTV shall provide to TiVo a “Publishing Instruction Report” to assist TiVo in planning the Showcase publishing activity and preparing the Showcase Publishing Status Report described below, with revised Publishing Instruction Reports to be provided by DIRECTV on a [*]basis no less than [*]prior to the start of the [*]described in the applicable Publishing Instruction Report. Each Publishing Instruction Report shall contain at a minimum the following information with respect to each DIRECTV-authored Showcase planned to be distributed during the described week: (i) First and last day of distribution of each DIRECTV-authored showcase planned to be distributed during the [*]; (ii) Central promotion text (if applicable) and associated distribution schedule;

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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(iii) Position in Showcase grid of each DIRECTV-authored Showcase; (iv) Total video clip length per DIRECTV-authored Showcase; (v) the length of each individual video clip; and (vi) DIRECTV’s requirements (including frequency of delivery) for any DIRECTV-Authored Showcase Reports (as described below in Section 6.6).

(b) Showcase Publishing Status Reports. Commencing on the First Amendment Effective Date, TiVo shall create, maintain and provide to DIRECTV, no later than [*]prior to the start of the [*]described, a “Showcase Publishing Status Report” containing at a minimum the following information with respect to each TiVo-authored Showcase, and, beginning with receipt of the Showcase Publishing Instruction Report, also with respect to each DIRECTV-authored Showcase planned to be distributed during the described week: (i) First and last day of distribution for each Showcase; (ii) DIRECTV Central promotion text (if applicable) and associated distribution schedule; (iii) Position in Showcase grid of each Showcase; (iv) Total video clip length per Showcase, along with schedule and total video clip length of all Showcases to be distributed to the hard disk of DIRECTV DVR Receivers during the week; and (v) description of each new TiVo-authored Showcase sufficient to allow DIRECTV to develop customer service agent scripting to support in-bound inquiries from DIRECTV DVR Receiver customers relating to such TiVo-authored Showcases. DIRECTV shall provide any corrections or changes to the Publishing Status Report items prior to expiration of the [*], and TiVo shall then make such corrections or changes prior to the distribution of such items to subscribers.”

9. DIRECTV-AUTHORED SHOWCASE REPORTS. A new Section 6.6 is added to the Services Agreement to read as follows:

“6.6 DIRECTV-Authored Showcase Reports.

(a) Reporting Obligations. Commencing with the First Amendment Effective Date and solely with respect to each DIRECTV-authored Showcase distributed during the Term, whenever DIRECTV-authored Showcases are distributed, TiVo shall provide DIRECTV with a basic report (the “DIRECTV-Authored Showcase Report”) of the User Data capturing interactions of end users with each such DIRECTV-authored Showcase. A separate DIRECTV-Authored Showcase Report shall be provided for each DIRECTV-authored Showcase on such frequency as requested by DIRECTV pursuant to the Publishing Instruction Report, but

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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in any event no more than a [*]basis per DIRECTV-Authored Showcase Report.

(b) Report Format. The format for a basic DIRECTV-Authored Showcase Report is presented in Attachment 1 to the First Amendment to this Agreement. DIRECTV acknowledges and agrees that TiVo may modify the form of such basic DIRECTV-Authored Showcase Report in TiVo’s sole discretion, so long as the information conveyed in the basic report is not materially reduced.

(c) Report Format Modification Requests. In the event DIRECTV wishes to receive a basic DIRECTV-Authored Showcase Report that differs from that defined in Attachment 1 to the First Amendment to this Agreement, DIRECTV shall request TiVo for such report; provided, however, if such modified report is created pursuant to the terms set forth herein, all subsequent DIRECTV-Authored Showcase Reports shall be in the modified form. DIRECTV shall be allowed to make such requests no more than [*]per calendar [*]. TiVo shall assess the costs associated with providing a report meeting with DIRECTV’s request. In the event that TiVo determines such costs will [*], TiVo will create the modified DIRECTV-Authored Showcase Report on a timely basis. In the event that TiVo determines such costs will [*], the parties will follow the processes set forth in Section 6.6(d) below.

(d) Comprehensive Reports. In the event DIRECTV or any DIRECTV-authored Showcase third party participant wishes to receive significantly more comprehensive DIRECTV-Authored Showcase Reports or/and additional research, DIRECTV shall contact, or direct such third party to contact, TiVo. TiVo shall negotiate in good faith with DIRECTV or such third party (as the case may be) the terms and conditions pursuant to which TiVo would provide such comprehensive reports and/or research.

(e) Duration of Obligations. TiVo’s obligations under this Section 6.6 shall continue through the end of the Initial Period, and any Renewal Period, as defined in Section 6.1. DIRECTV acknowledges and agrees that this Section 6.6 comprises TiVo’s sole and entire reporting obligation with respect to User Data, other than as expressly set forth in Section 3.2 of this Agreement and the parties’ [*].”

[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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10. INDEMNIFICATION. Section 10.1(a) of the Services Agreement is amended to add a clause at the end of item (i) (1) that reads as follows:

“violates any right of publicity or privacy, literary, music performance or dramatic right or otherwise constitutes libel, slander, plagiarism, or a violation of personal or property rights or”

11. SURVIVAL. The last sentence of Section 12.3 of the Services Agreement is hereby deleted in its entirety and replaced by the following:

“Notwithstanding the foregoing, provided DIRECTV has exercised the option in Section 6.1(b) and this Agreement is not terminated by TiVo for DIRECTV’s material breach, (i) DIRECTV shall continue to have the rights set forth in Sections 6.1(b) and 6.6 subject to all rights and restrictions set forth herein and (ii) TiVo shall continue to have the rights to use the User Data as set forth in Sections 3.1 and 3.2 to the extent set forth in Section 6.1(b).”

12. EFFECT OF AMENDMENT. Except as expressly modified herein, all other terms and conditions of the Services Agreement shall remain in full force and effect.

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IN WITNESS WHEREOF, TiVo and DIRECTV have duly executed this First Amendment by their respective duly authorized officers. This First Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same original.

TIVO INC.		DIRECTV, INC.
By:	/s/    EDWARD LICHTY	By:	/s/    S.A. CAMPBELL
Printed Name:	Edward Lichty	Printed Name:	S.A. Campbell
Title:	VP, Business Development	Title:	Sr. VP, Programming

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael Ramsay, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TiVo Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 15, 2003

/s/ Michael Ramsay

Michael Ramsay

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David H. Courtney, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TiVo Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 15, 2003

/s/ David H. Courtney

David H. Courtney

Executive Vice President, Worldwide

Operations and Administration and

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the TiVo Inc. (the “Company”) Quarterly Report on Form 10-Q for the period ending October 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Ramsay, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: December 15, 2003

/s/ Michael Ramsay

Michael Ramsay

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the TiVo Inc. (the “Company”) Quarterly Report on Form 10-Q for the period ending October 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David H. Courtney, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: December 15, 2003

/s/ David H. Courtney

David H. Courtney

Executive Vice President, Worldwide

Operations and Administration and

Chief Financial Officer