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TiVo settles with Motorola, Cisco and TWC for 490M

Discussion in 'TiVo Coffee House - TiVo Discussion' started by drebbe, Jun 7, 2013.

  1. Jun 7, 2013 #1 of 42
    drebbe

    drebbe Carbon Blob

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    TiVo Announces Settlement of Patent Litigation and Doubling of Stock Repurchase Authorization

    Settles Patent Litigation With Cisco, Motorola and Time Warner Cable for $490 Million

    Brings Aggregate Awards and Settlements From Intellectual Property Actions to Roughly $1.6 Billion

    Increases Stock Repurchase Authorization to $200 Million With Plans to Increase Size of Current 10b5-1 Plan

    SAN JOSE, CA -- (Marketwired) -- 06/07/13 -- TiVo Inc. (NASDAQ: TIVO) announced today that it has settled its pending patent litigation with Motorola (now owned by Google and Arris), Cisco and Time Warner Cable and that TiVo has agreed to enter into certain patent licensing arrangements with Arris, Cisco, and Google. As part of the settlement, Google and Cisco will pay TiVo an upfront lump-sum payment of $490 million, bringing the total from awards and settlements related to the use of certain TiVo intellectual property
    to roughly $1.6 billion.

    In conjunction with approving the terms of the settlement, TiVo's board of directors also approved a major expansion of TiVo's stock repurchase authorization. The board's action doubles the size of the authorization from $100 million to $200 million and extends the stock repurchase plan for an additional two years until August 29, 2015. Additionally, TiVo intends to increase the size of its 10b5-1 trading plan significantly as a result. This will allow TiVo to build on the almost $57 million worth of equity acquired through open market purchases and from tax withholdings on employee restricted share vesting since the time the board of directors first authorized the $100 million stock repurchase plan. This increased and extended repurchase authorization means TiVo will have over $160 million of unused stock repurchase authorization.

    "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 and our shareholders derive from our investments in protecting TiVo's intellectual property," said Tom Rogers, CEO and President of TiVo. "Further, this settlement significantly enhances our already strong balance sheet, bringing our cash position to over $1 billion before inclusion of future expected payments of at least $400 million from prior settlements. We intend to use our significant capital resources to drive shareholder value, including more aggressively returning capital to shareholders under our newly increased share repurchase authorization and we will be increasing the size of our 10B5-1 trading plan as soon as permissible."

    Mr. Rogers added, "Importantly, we just recently closed one of our best quarters ever in terms of subscription growth, driven by a number of our existing operator deals in the U.S. and abroad that are now fully up and running. As a result, we delivered our highest gross margin ever and solid MSO revenue growth of 98% year-over-year, and we expect this MSO revenue growth will continue as we roll out additional deployments. So, as we look out beyond today's important settlement we believe our core operating business will continue to drive growth to both the top and bottom line."

    As part of the settlement, TiVo and Motorola, Cisco, and Time Warner Cable agreed to dismiss all pending litigation between the companies. TiVo will recognize a portion of the payment as past damages during the second quarter and the remainder over time. The company intends to provide additional details regarding the timing of revenue recognition in its second quarter fiscal year 2014 earnings report. Further, as a result of this settlement, TiVo expects net income and Adjusted EBITDA to benefit from lower litigation spend in the remainder of its fiscal year ending January 31, 2014 and beyond.
     
  2. Jun 7, 2013 #2 of 42
    jfh3

    jfh3 New Member

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    Not a good day in Mr. Rogers neighborhood.

    That settlement is about 25%-40% of what most analysts expected.

    No ongoing revenue in the deal? I hate to say it, but this may finally signal the beginning of the end for TiVo.

    A very hollow "win" for TiVo and a sad day for those that believe IP can be protected.
     
  3. Jun 7, 2013 #3 of 42
    atmuscarella

    atmuscarella Well-Known Member

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    What I find really sad is that TiVo's management and board of directors believes it is better for stock holders to use lots of the money to repurchase stock instead of for product development and/or marketing.
     
  4. Jun 7, 2013 #4 of 42
    jfh3

    jfh3 New Member

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    TiVo has no clue how to effectively market to their target audience. Sadly, it looks like those same people must have negotiated the Dish and Motorola settlements.
     
  5. Jun 7, 2013 #5 of 42
    morac

    morac Cat God

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    That really wasn't much of a settlement. Dish and Verizon must be kicking themselves now ("we could have settled for what!?"). The settlement is also causing TiVo's stock to tank, which is sad because it was doing well lately.

    TiVo's patent expires in a few years anyway. At that point they won't get anymore payouts from other companies and even their partners will be free to implement their own TiVo devices. What's TiVo going to do to make money in the future? Raise prices?
     
  6. Jun 7, 2013 #6 of 42
    moedaman

    moedaman New Member

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    Maybe Tivo's "IP" proof isn't that strong in the first place. Otherwise why accept those settlements in the Dish and Motorola cases?
     
  7. Jun 7, 2013 #7 of 42
    atmuscarella

    atmuscarella Well-Known Member

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    That's my point; by saying the money is better used to buy back stock instead of product development and/or marketing they are basically saying they don't have a long (or even medium) term vision for success. There next play is to sell the company if anyone is still interested.
     
  8. Jun 7, 2013 #8 of 42
    jfh3

    jfh3 New Member

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    If they really want to aggressively return capital to shareholders, just issue a one time dividend.
     
  9. Jun 7, 2013 #9 of 42
    jfh3

    jfh3 New Member

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    Sam, what's your take? I know you must be as shocked as anyone. :(
     
  10. tallman834

    tallman834 New Member

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    how will TiVo make any money atfer tivo's patents expire in 2018?
     
  11. aaronwt

    aaronwt UHD Addict

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    It will have to be from the many, many millions of subscribers they will have by then.
     
  12. tivogurl

    tivogurl New Member

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    Maybe they'll use some of the money to hire engineers to fix longstanding bugs and implement new features. A girl can dream, can't she?
     
  13. UCLABB

    UCLABB Active Member

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    Best scenario would be to be bought by Apple. First, the Apple name itself would be a huge boost in consumer acceptance. Second, Apple has the money to invest to make the product even better.

    Unfortunately, I think TiVo is probably on a downward slope. It seems that other companies are quickly developing good DVRs, Hopper, Genie. TiVo's best hope was to get providers to use it's product. That hope is pretty much gone now.
     
  14. moedaman

    moedaman New Member

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    A dvr is against Apple's business strategy. They want to put all of their customers on the cloud. They never put BD drives in any of their equipment due to wanting you to get your HD video from iTunes and now they don't even have dvd drives in many of their products. I'm willing to bet that if they could get away with it, they would eliminate HDDs and have their customers use Apples servers for storage, for a price of course.
     
  15. MichaelK

    MichaelK New Member

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    did i miss the <sarcasm> tag?
     
  16. aaronwt

    aaronwt UHD Addict

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    I wasn't being sarcastic. At the end of the 1st quarter this year they had 3.4 million subscribers. YOY they increased by over 900K subscribers. The last I heard they were projecting to add millions more over the next few years.
     
  17. sbiller

    sbiller Active Member

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    While the amount was disappointing its still one of the largest patent settlements in history. TiVo wanted to put the litigation behind them to focus on growing the core business which Aarron points out is growing at 1mn MSO subs per year and accelerating. TiVo is on-track to replace the '389 patent from a recurring revenue perspective when it expires in 2018. The street over-reacted and TiVo will be significantly higher 12 months from now. The core business is essentially being valued near zero right now with over $1 billion cash on hand.
     
  18. Johncv

    Johncv Active Member

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    Sam, sound like TiVo also made a cross-licenses agreement with Google, Cissco, and Moto. Or am I reading to much in tea leaves. ;)
     
  19. sbiller

    sbiller Active Member

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    Probably reading too much. Standard terminology IMHO.
     
  20. davezatz

    davezatz Funkadelic

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    Not all subscribers are created equal. Retail generates significantly more revenue for the company per user/box and if Liberty's Virgin acquisition results in a TiVo replacement in say the next 24 months, 1.5 million of those subscribers vanish. Although I don't know that it's likely given the massive success and difficulty in transitioning out.
     

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