) will be receiving $250.4 million from
Verizon Communications Inc.
) to settle a certain DVR technology related patent infringement
lawsuit. According to the terms, Verizon is set to make an upfront
payment of $100 million and will be paying the remaining $150.4
million on a quarterly basis through 2018. Concurrent with the
recent settlement, both the companies have dropped all pending
litigation charges against each other.
In addition to this settlement, a mutual patent licensing
agreement was signed between the two companies. According to the
licensing agreement, Verizon will pay monthly licensing fees to
TiVo if the subscriber base of Verizon's DVR surpasses a certain
limit through July 2018. This would be beneficial for TiVo as the
company would generate incremental revenue with Verizon's DVR
Through this settlement, TiVo has not only ensured a recurring
revenue stream through 2018, but has showed vigor in defending and
simultaneously monetizing its intellectual property.
This marks TiVo's third successful intellectual property
monetization. The first one was the $500 million time warp patent
DISH Network Corp.
). The second settlement was with
) for $215 million. Moreover, TiVo and
) had settled their patent litigation disputes by dropping all
charges against each other.
The present settlement will also bring down the litigation
expenses that TiVo incurs every quarter owing to these ongoing
patent disputes. This apart, partnerships with leading companies,
new customer wins, product launches and international expansion
will drive top-line growth.
However, pending patent litigation issues against Motorola and
Cisco Systems Inc
) coupled with rising R&D costs, higher hardware and sales
& marketing costs are expected to impact TiVo's profitability
over the next few quarters. Increasing competition from cable and
satellite providers could also hurt profitability over the long
term. Thus, we have a Neutral recommendation on TiVo over the long
term (6-12 months).
Currently, TiVo has a Zacks #3 Rank, which implies a Hold rating
for the short term (1-3 months).
CISCO SYSTEMS (CSCO): Free Stock Analysis
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TIVO INC (TIVO): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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