March 5 (Bloomberg) -- TiVo Inc., the pioneer of digital video recorders that let television viewers skip commercials, reported a narrower fourth-quarter loss as hardware costs fell.

The net loss shrank to $6.36 million, or 6 cents a share, from a loss of $19.5 million, or 20 cents, a year earlier, Alviso, California-based TiVo said today in a statement. Service and technology revenue rose 1.9 percent to $58 million. Analysts had predicted a loss of 11 cents, the average of 14 estimates.

Chief Executive Officer Thomas Rogers has moved the company away from selling subsidized set-top boxes and is instead licensing its DVR software to cable and satellite TV operators. Comcast Corp., the largest U.S. cable TV company, began offering TiVo DVR service in the New England area in January. Cox Communications Inc. plans to offer the service too, TiVo said.

``The key for TiVo now is to secure new, legitimate distribution partnerships with cable and satellite pay-TV providers,'' BMO Capital Markets analyst Leland Westerfield wrote in a Feb. 20 report.

TiVo rose 32 cents, or 3.9 percent, to $8.46 in extended trading. The stock gained 11 cents to $8.14 at 4 p.m. New York time in regular Nasdaq Stock Market trading and has declined 2.4 percent this year.

TiVo continues to have software licensing discussions with other cable operators, Rogers said today in a phone interview.

Forecast

Total sales fell 3.6 percent to $74.1 million in the quarter ended Jan. 31, beating the $72.7 million average of 13 analysts' estimates compiled by Bloomberg.

The cost of hardware revenue declined 45 percent to $23.9 million from a year earlier. Subscriber acquisition costs, including sales and marketing, fell to $7.2 million from $9.9 million.

For the first quarter, TiVo forecasts a net loss of $1 million to $3 million on service and technology revenue of as much as $55 million. TiVo predicted adjusted earnings before interest, taxes, depreciation and amortization of $5 million to $7 million.

The company added 33,000 net TiVo-owned subscribers in the fourth quarter, fewer than the 101,000 signed a year ago. Overall, TiVo lost 122,000 subscribers, cutting the total to 3.95 million, TiVo said. The decline reflects the loss of subscribers at DirecTV Group Inc., which sells its own recorders.

The subscriber loss was in line with Kaufman Bros. analyst Todd Mitchell's estimate of 120,000 to 125,000.

Cancellations

The cancellation rate rose to 1.5 percent from 1.2 percent a year earlier and 1.3 percent in the third quarter. TiVo said some of the cancellations were due to customers switching to high-definition offerings from satellite-TV providers.

Rogers has also expanded revenue through services such as its audience-measurement ratings that show second-by-second which programs and advertisements are seen. CBS Corp., owner of the most-watched TV network, and General Electric Co.'s NBC Universal subscribe to the service.

The advertising research will become ``a significant business,'' Rogers said in the interview, declining to give further financial details or forecasts.

The ratings data may ultimately become as valuable as the company's distribution revenue, said New York-based Westerfield, who expects the stock's total return to outperform the Standard & Poor's 500 Index by more than 15 percent.

TiVo won an appeals court ruling in January that Dish Network Corp. infringed its technology patent, and a $74 million award, increased to $94 million, was upheld. Dish still has time for further appeals and said its latest DVR software doesn't infringe TiVo's patent.

Rogers said on the company's conference call that he's skeptical Dish Network has a workaround for the patent.

(TiVo held a conference call at 5 p.m. New York time, accessible at http://www.tivo.com/ir)

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

Last Updated: March 5, 2008 18:30 EST