TiVo strikes black ink for the first time.(TiVo Inc. reported its first ever quarterly profit)

TiVo, despite a net loss in subscribers, reported its first ever quarterly profit, which it achieved by cutting expenses.

Last year TiVo lost DirecTV, its largest customer, when DirecTV decided to get third-party manufacturers to make DVRs based on a design from News Corp's NDS.

Since then, Tivo has operated on three fronts:

- Increase sales of TiVo boxes to consumers by adding new features.

- Try to land other pay-TV operators by licensing them to use its software and service on DVR hardware from other manufacturers. It has such deals with Comcast and Cox and a hybrid sort of development deal with Australia's Seven Media Group.

- Generate advertising income with specially targeted long-form ads. TiVo CEO Tom Rogers said the company expects its advertising business to grow with the number of subscriptions.

TiVo's future as a maker of DVRs seems limited because the pay-TV services have the inside edge when it comes to selling them to their existing subscribers and they prefer not to buy gear from TiVo.

For the first quarter, TiVo reported net income of $835,000, which compares with a year-earlier loss of $10.7 million. Revenue for the quarter, which ended April 30, increased 6.4% to $60.4 million from $56.8 million a year ago. Service revenue went from $54.2 million from $47 million. Technology revenue dropped to $3.93 million from $8.08 million. Hardware revenue increased to $2.29 million from $1.72 million a year ago.

General and administrative expenses dropped from $15.1 million to $11.2 million during the latest quarter.

TiVo ended the quarter with 4.34 million total subscriptions, down from 4.42 million a year earlier. Its monthly churn rate was 1.1%, up from 0.9% a year ago but down from 1.2% in the prior quarter.

For the second quarter, TiVo is projecting a loss of $5 million to $8 million and service and technology revenue of $57 million to $59 million.

TiVo initiatives include:

- Bundling its services with EarthLink's Internet connection services later in 2007.

- The Comcast and Cox deals, which have not yet been widely deployed, but will allow the pay-TV operators' subscribers to pay extra to get the TiVo service and software.

- The Amazon Unbox on TiVo, in which full-length content is downloaded to a TiVo box, where it can be shown on a connected TV rather than a PC.

- Seven will market TiVo products and services in Australia and New Zealand. There was some wording in the TiVo-Seven announcement that seemed to indicate that the TiVo boxes Down Under would also include access to videos that were delivered over the Net.

- Continued development of a lower-priced, mass appeal HD capable unit.

- An advertising program that launched in early May to point out unique features of TiVo's boxes and service, seperating TiVo from "generic" DVRs.

- Progress on the advertising front, with ratings data in DVR households taking hold as an important measurement tool for advertising by the multibillion-dollar television industry. IPG and Starcom have purchased subscriptions to TiVo's Stop||Watch Ratings service, which provides second-by-second, time-shift, program and commercial DVR ratings data.

There's a big pot of gold that TiVo thinks awaits it in the courts. It believes its many DVR-related patents will win out in the legal battle it's having with EchoStar. EchoStar operates the DISH satellite service and is a partner with AT & T in the telcos' pay-TV efforts. TiVo said it's moving closer to a resolution at the Federal Court of Appeals, which ruled in October that EchoStar could continue to offer its digital-video recording service while it appeals an earlier jury decision that it had infringed on TiVo's patent.