TiVo Soars After Settling DVR Suit With Google’s Motorola
By Susan Decker & Cliff Edwards – Jun 7, 2013 9:04 AM ET
TiVo Inc. (TIVO) dropped as much as 21 percent in early trading after settling a patent dispute with Google Inc. (GOOG)’s Motorola Mobility unit, Cisco Systems Inc. (CSCO) and Time Warner Cable Inc. (TWC) for $490 million — less than estimated.
TiVo announced the amount this morning, saying it brought the total from awards and settlements related to the use of TiVo’s digital-video-recorder technology to about $1.6 billion. The San Jose, California-based company also approved a $200 million stock-buyback plan. As part of the agreement, Cisco and Google will enter into a patent-licensing deal with TiVo.
Tony Wible, an analyst at Janney Montgomery Scott in Philadelphia, had projected that the latest payment would be about $939 million, assuming six years of damages from Motorola DVRs that it said were infringing its patents.
The shares tumbled as low as $10.77 in premarket trading after closing at $13.71 yesterday in New York. The plunge more than erases TiVo’s 8.3 percent gain yesterday when news of the settlement first emerged.
The agreement averts a trial that was scheduled to start next week and eliminates some final holdouts in TiVo’s efforts to get DVR makers to license its technology. TiVo, which created the DVR market only to see competitors grab more customers, has collected more than $1 billion in patent royalties fromDish Network Corp. (DISH), AT&T Inc. (T) and Verizon Communications Inc.
The company now has to prove it has a viable business “outside of collecting checks,” saidAndy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon, who has the equivalent of a hold on the shares.
Much of the company’s growth probably will come from selling its software and services in Europe, Hargreaves said yesterday. “If you strip out all the litigation payments and business costs, the business loses money.”
TiVo has waged more than nine years of litigation to get compensation for its inventions. Motorola Mobility and TiVo accused each other of infringing patents for DVR services in a case in Texarkana, Texas. Google, based in Mountain View, California, inherited the case when it bought Motorola Mobility last year.
Motorola Mobility is “pleased that all parties involved have reached an agreement to resolve pending litigation,” William Moss, a company spokesman, said in an e-mail yesterday.
In an October 2012 court filing, TiVo said it may be entitled to “billions of dollars” from Motorola Mobility, based on the number of television set-top boxes for New York-based Time Warner Cable.
Arris Group Inc. (ARRS), a cable-equipment maker, is buying Google’s Motorola Home business for $2.35 billion. Under terms of the acquisition, Arris would be responsible for no more than $50 million of the liability in any loss to TiVo, according to a regulatory filing by the Suwanee, Georgia-based company.
The cases are Motorola Mobility Inc. v. TiVo Inc., 11cv53; and TiVo Inc. v. Cisco Systems Inc., 12cv311, both U.S. District Court for the Eastern District in Texas (Marshall).
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