NEW YORK, N.Y. – TiVo settled patent disputes with Cisco, Motorola Mobility and Time Warner Cable, averting a trial that was to begin next week and bringing to a close a string of long-running legal squabbles over its pioneering digital video recorder technology.
The terms fell well short of what most TiVo investors had expected, however, and shares of TiVo plunged 19 per cent Friday.
Under the agreement, TiVo will get a lump-sum payment of $490 million from Google Inc. and Cisco Systems Inc. Cisco will be responsible for $294 million of that, according to a Securities and Exchange Commission filing.
TiVo will also enter into patent licensing deals with Google, Cisco and Arris Group Inc. Google bought Motorola Mobility in 2012 and sold its set-top making unit to Arris this year.
TiVo Inc., based in Alviso, Calif., spent the past several years going after pay-TV companies, saying that they were using its patented technology in DVRs. It previously negotiated settlements in similar cases against companies including Dish Network Corp., AT&T Inc. and Verizon Communications Inc. Counting this week’s settlement, TiVo’s awards from patent lawsuits now total about $1.6 billion. TiVo has still struggled to make money, however, posting annual losses in eight of the past 10 years.
“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,” TiVo CEO Tom Rogers said. Motorola Mobility, Cisco and Time Warner Cable said they were satisfied with the deal. Officials for Arris deferred comment to Motorola Mobility.
Piper Jaffray analyst Michael Olson said that while the amount of the settlement was “disappointing,” it removes some of the uncertainty surrounding TiVo and its legal expenses. Olson said he had expected a combined settlement of about $550 million, but acknowledged that many other analysts had predicted a higher overall number.
“I think they felt strongly about the merits of their case but ultimately didn’t want to leave the decision in the hands of a jury,” Olson said, adding that certainty was probably of more value to the company than the possibility of a higher settlement.
Olson, who backed his “Overweight” rating for the stock, noting that TiVo is having more success in licensing its technology and he expects the company’s subscriber base to continue to continue to grow.
Tony Wible of Janney Capital Markets was less optimistic and cut his rating for TiVo stock to “Neutral” from “Buy.” Wible said that while TiVo will continue to strike new licensing deals and add subscribers, the pace of those agreements will be unpredictable and they’ll probably be much smaller than those of the past, noting that the company already has deals with most of the top pay-TV providers.
Following the announcement, TiVo said it would double its stock buyback program to up to $200 million and extended the plan for an additional two years.
Shares of TiVo fell $2.61 to close at $11.10 Friday. Over the past 52 weeks, the shares have traded between $7.75 and $14.10.