TiVo Inc.
(
TIVO
) and
Microsoft Corp.
(
MSFT
) have settled their ongoing patent litigation disputes by dropping
all charges against each other. Since 2010, both the companies
remained entangled in legal disputes that involved suits and
counter suits relating to a certain DVR technology patent. However,
Bloomberg reported that no monetary transaction was discussed in
the settlement, and TiVo did not grant any patent rights to
Microsoft.
In 2009, TiVo had sued
AT&T Inc.
(
T
), a Microsoft client, for infringing upon three of its DVR
patents. Thereafter, to lend support to its client, Microsoft sued
TiVo in 2010. However, in January 2012, AT&T settled its
dispute with TiVo for $215.0 million and both the companies dropped
all pending litigation charges against each other.
As TiVo and Microsoft settle their litigation cases, it remains
to be seen whether
Verizon Communications Inc.
(
VZ
) will tread the same path.
TiVo has been defending its patents that have yielded a
recurring revenue stream. TiVo's successful intellectual property
monetization began with the $500 million time warp patent
settlement with DISH Network and
EchoStar Corporation
(
SATS
). The recent settlement with AT&T ensured an upfront payment
of $51 million and the remaining $164 million on a quarterly basis
through 2018.
Moreover, the present settlement will also bring down the
litigation expenses that TiVo incurs every quarter. In the recently
concluded quarter, TiVo incurred $16 million in legal settlement
expenses and gained $54.4 million from litigation proceeds.
Moreover, management expects litigation expenses in the current
quarter to decrease significantly with less legal disputes.
We remain optimistic about TiVo's long-term growth potential due
to 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.
(
VMED
), RCN, ONO, Charter Communications, Suddenlink and DIRECTV going
forward.
However, pending patent litigation issues, 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.
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
VIRGIN MEDIA (
VMED
): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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