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Cable Technology Feature Article

June 07, 2013

TiVo Settles Patent Suit for Less Than Expected

By Tara Seals, TMCnet Contributor

TiVo (News - Alert) Inc. (TIVO) was trading down by about 18 percent in mid-morning trading after settling a patent dispute with Motorola Mobility, Cisco Systems and Time Warner Cable for $490 million – about half of what analysts had expected.

Tony Wible, an analyst at Janney Montgomery Scott in Philadelphia, told Bloomberg (News - Alert) that he was expecting the settlement, which comes after nine years of litigation over DVR technology, to be $939 million, assuming six years of damages from Motorola. But now, Moto and Cisco (News - Alert) will pay TiVo the $490 million in an upfront lump-sum payment, bringing the total from awards and settlements related to the use of certain TiVo intellectual property to roughly $1.6 billion. And, the dispute has been dropped in light of new licensing agreements.

"We are pleased to reach an agreement that brings our pending litigation to an end and further underscores the significant value our distribution partners derive from TiVo's technological innovations and our shareholders derive from our investments in protecting TiVo's intellectual property," said Tom Rogers (News - Alert), CEO and president of TiVo, in a statement.

Looking to reassure investors, he added that TiVo just closed “one of our best quarters ever in terms of subscription growth, driven by a number of our existing operator deals in the U.S. and abroad that are now fully up and running.” The company saw MSO revenue growth of 98 percent year-over-year in the latest quarter.

“We intend to use our significant capital resources to drive shareholder value, including more aggressively returning capital to shareholders under our newly increased share repurchase authorization and we will be increasing the size of our 10B5-1 trading plan as soon as permissible,” Rogers said.

After the settlement, TiVo’s cash position is more than $1 billion before inclusion of future expected payments of at least $400 million from prior settlements, he noted.

Going forward, patent licensing should be a lucrative business. TiVo has collected more than $1 billion in patent royalties from DISH Network, AT&T and Verizon (News - Alert) Communications Inc. alone. But some wonder if the company has enough juice in it “outside of collecting checks,” noted Andy Hargreaves, an analyst at Pacific Crest Securities. He told Bloomberg that despite what Rogers said, future growth will likely hinge on selling software and services in Europe. “If you strip out all the litigation payments and business costs, the business loses money,” he said.

Edited by Rich Steeves

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