TiVo Inc. (
TIVO
)
recently won a decisive victory over its Australian competitor Vivo
International in a trademark lawsuit. As per the latest Australian
Federal Court ruling, Vivo International has been banned from using
the "Vivo" trademark going forward.
Earlier, TiVo had sued Vivo International for allegedly
infringing its trademark. TiVo's argument that the "Vivo" trademark
used by the Australian company sounded similar to TiVo and could
create confusion in the minds of customers was supported by the
federal court. The court in its ruling cited the global reputation
of the Tivo brand and said that the Tivo brand was well recognized
in Australia much earlier than its commercial launch in 2008.
The Federal court agreed with Tivo's claim that Vivo knowingly
adopted a similar-sounding trademark in 2008, which resulted in the
infringement of the Tivo brand. Following the ruling, the
Australian Federal court ordered the Vivo mark to be removed from
the trade registry. The court also warned the Australian company to
refrain from using the disputed trademark, as it could result in
further penalties going forward.
We believe that the recent lawsuit win in Australia demonstrates
TiVo's increasing popularity in countries outside the U.S. We
believe that the favorable court ruling will enhance TiVo's
reputation in Australia thereby boosting its subscriber base over
the long term.
In fact, international expansion has been one of the key long
term growth catalysts for Tivo. Based on its strategic partnerships
with a number of local providers such as Seven Network Limited
(Australia), ONO (Spain), Virgin Media (U.K.), Canal Digital
(Scandinavia), Comcast (New England) and Cablevision (Mexico), TiVo
has been quite successful in expanding its services internationally
over the last couple of years.
International growth can significantly offset the effects of
decelerating U.S. subscriber growth going forward. We believe that
TiVo is well positioned to benefit from this growth attributable to
its diversification and significant partnerships globally.
Moreover, the latest lawsuit win will further enhance Tivo's
reputation, justifying the aggression with which it has been
defending its intellectual property. Over the last couple of years,
Tivo has successfully defended its patents that have resulted in
million dollar back-to-back settlements with
DISH Network (
DISH
)
,
EchoStar Corporation (
SATS
)
,
AT&T (
T
)
and
Microsoft (
MSFT
)
.
These settlements not only resulted in a recurring revenue
stream for Tivo but also significantly lowered its litigation
expenses. Management expects litigation expenses in the current
quarter to decrease significantly with fewer legal disputes
compared to previous quarters.
Our Take
We remain optimistic about TiVo's long-term growth potential due
to new partnerships, product launches, international expansion and
declining legal hassles. However, rising subscription acquisition
costs and higher R&D expenses 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 long-term Neutral recommendation on TiVo.
Currently, TiVo has a Zacks #3 Rank, which implies a 'Hold' rating
in the short term.
DISH NETWORK CP (
DISH
): Free Stock Analysis Report
MICROSOFT CORP (
MSFT
): Free Stock Analysis Report
ECHOSTAR CORP (
SATS
): Free Stock Analysis Report
AT&T INC (
T
): Free Stock Analysis Report
TIVO INC (
TIVO
): Free Stock Analysis Report
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