) has filed a lawsuit against
), alleging that Cisco infringed four of its digital video recorder
(DVR) technology patents, Reuters reported.
Cisco claimed that TiVo has been milking these patents by suing
companies using the technology and at the same time refusing to
license the technology. This could be the reason that Cisco filed a
lawsuit against TiVo a few days back, asking the court to force
TiVo to license the technology or declare the patents void.
TiVo's countersuing of Cisco therefore comes as no surprise.
TiVo's defense of its patents have generated a recurring revenue
stream for the company. Notably Cisco's DVRs are sold by its
Scientific Atlanta division to companies such as
Time Warner Cable Inc
Verizon Communications Inc
TiVo has already won some lawsuits in the past, which were
related to the same patents that are being contested in this
present case. Therefore, there is no question as to the ownership
of the patents. We think that the thing to be decided by the judge
is whether TiVo can lawfully avoid licensing the technology. Cisco
clearly intends to license the technology and will be happy if the
court enforces this.
But TiVo being the owner could say that it should be able to
decide who it licenses to. Its successful intellectual property
monetization began with the $500 million time warp patent
settlement with DISH Network and
The recent settlement with AT&T ensured an upfront payment
of $51 million and the remaining $164 million on a quarterly basis
through 2018. More recently, TiVo and
) had settled their ongoing patent litigation disputes by dropping
all charges against each other. The settlement did not lead to any
monetary transaction and TiVo did not grant any patent rights to
Notably, the absence of any litigation proceedings during the
recently reported quarter had a negative impact on TiVo's
profitability. The company reported net loss of $20.8 million
compared to a net profit of $139.0 million in the year-ago
Moreover, pending patent litigation issues (Verizon, Motorola
and Time Warner), rising subscription acquisition 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.
However, we remain optimistic about TiVo's long-term growth
potential, which is backed by new partnerships, product launches
and international expansion. We believe that TiVo will continue to
witness strong subscriber growth based on its partnerships with
Virgin Media Inc.
), RCN, ONO, Charter Communications,
), Suddenlink and DIRECTV going forward.
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).
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