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Old 06-07-2013, 07:09 AM   #1
drebbe
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TiVo settles with Motorola, Cisco and TWC for 490M

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.
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Old 06-07-2013, 08:43 AM   #2
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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.
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Old 06-07-2013, 08:53 AM   #3
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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.
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Old 06-07-2013, 08:56 AM   #4
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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.
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Old 06-07-2013, 09:08 AM   #5
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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?
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Old 06-07-2013, 09:22 AM   #6
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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.
Maybe Tivo's "IP" proof isn't that strong in the first place. Otherwise why accept those settlements in the Dish and Motorola cases?
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Old 06-07-2013, 09:25 AM   #7
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What's TiVo going to do to make money in the future? Raise prices?
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.
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Old 06-07-2013, 11:15 AM   #8
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If they really want to aggressively return capital to shareholders, just issue a one time dividend.
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Old 06-07-2013, 11:41 AM   #9
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Sam, what's your take? I know you must be as shocked as anyone.
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Old 06-07-2013, 11:58 AM   #10
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how will TiVo make any money atfer tivo's patents expire in 2018?
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Old 06-07-2013, 12:33 PM   #11
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how will TiVo make any money atfer tivo's patents expire in 2018?
It will have to be from the many, many millions of subscribers they will have by then.
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Old 06-07-2013, 01:26 PM   #12
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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?
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Old 06-07-2013, 01:54 PM   #13
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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.
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Old 06-07-2013, 03:47 PM   #14
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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.
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.
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Old 06-07-2013, 05:26 PM   #15
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It will have to be from the many, many millions of subscribers they will have by then.
did i miss the <sarcasm> tag?
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Old 06-07-2013, 06:15 PM   #16
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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.
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Old 06-07-2013, 06:36 PM   #17
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Sam, what's your take? I know you must be as shocked as anyone.
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.
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Old 06-07-2013, 06:53 PM   #18
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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.
Sam, sound like TiVo also made a cross-licenses agreement with Google, Cissco, and Moto. Or am I reading to much in tea leaves.
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Old 06-07-2013, 08:13 PM   #19
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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.
Probably reading too much. Standard terminology IMHO.
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Old 06-08-2013, 07:38 AM   #20
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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.
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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Old 06-08-2013, 07:41 AM   #21
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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.
Yes the MSOs add something like a little over $1 for each subscriber. While retail subscribers account for a little over $8. At least that is what I had read in an article pertaining to their first quarter results.
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Old 06-08-2013, 01:00 PM   #22
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Yes the MSOs add something like a little over $1 for each subscriber. While retail subscribers account for a little over $8. At least that is what I had read in an article pertaining to their first quarter results.
True, but TiVo also pays subscriber acquisition costs as well as ongoing support costs for their owned subscribers that are in most cases paid by the MSO in those deals.
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Old 06-08-2013, 01:09 PM   #23
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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.
I thought the same thing about TiVo and DirecTV once upon a time.
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Old 06-09-2013, 10:31 AM   #24
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Now That the Dust Has Settled

Excellent perspective re $TIVO settlement: Now That the Dust Has Settled, So to Speak | Investor Discussion Board.

http://t.co/pCTXt3c9Bj
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Old 06-09-2013, 11:52 AM   #25
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Excellent perspective re $TIVO settlement: Now That the Dust Has Settled, So to Speak | Investor Discussion Board.

http://t.co/pCTXt3c9Bj
Somewhat of a counterpoint - http://m.seekingalpha.com/article/1488022
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Old 06-10-2013, 11:31 AM   #26
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It seems like it was cost effective for these companies to infringe on Tivo's patents and get their product to market quickly. I guess the courts are content to allow themselves to be used as a billing service. At least the lawyers got paid.
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Old 06-10-2013, 07:15 PM   #27
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It seems like it was cost effective for these companies to infringe on Tivo's patents and get their product to market quickly. I guess the courts are content to allow themselves to be used as a billing service. At least the lawyers got paid.
Correct. For any company willing to go to court rather than license IP, it is a license to steal. The TiVo cases against Dish et al. will be in the next generation of business school curriculums under the heading "Winning the Battles, but losing the War".

It may not be evident yet, but Charlie Ergen and his en banc savior killed TiVo.

I was once a bigger company supporter than Sam, but if TiVo isn't dead, it is certainly on life support and it hasn't shown it can deliver on product promises in a timely fashion ("one box").

A very impressive Series 5 box with blow-me-away software better be released quickly and show enough to the retail users that the MSO users demand the same thing. The goodwill that may have existed with the Premiere is long since gone.
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Old 06-10-2013, 07:31 PM   #28
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Excellent perspective re $TIVO settlement: Now That the Dust Has Settled, So to Speak | Investor Discussion Board.

http://t.co/pCTXt3c9Bj
Nope. Not buying "TiVo settled for significantly less than every analyst believed was reasonable just so they could join the hunt club."

More likely it was "Doesn't matter what the judge says, we'll appeal until long after 389 has expired or until we make you irrelevant in the marketplace. Settle for a fraction of fair value or we'll crush you."

I'd love to be proven wrong. If TiVo is indeed in the club now, we should see significant, tangible results in 12-18 months. If we don't, then Rogers will be remembered as the CEO that killed TiVo, not the one who saved it.

Unless TiVo got one helluva deal in that room, it makes no sense to abandon a ten year old plan for a ten minute old one.
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Old 06-10-2013, 07:38 PM   #29
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I was once a bigger company supporter than Sam, but if TiVo isn't dead, it is certainly on life support and it hasn't shown it can deliver on product promises in a timely fashion ("one box").
The company has hundreds of millions in cash and seems unwilling to spend any of it on additional engineers to develop features, fix bugs, and accelerate product development. I see that as investing in the core of their business. What, then, does TiVo think it's in the business of selling?
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Old 06-12-2013, 06:25 PM   #30
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Nope. Not buying "TiVo settled for significantly less than every analyst believed was reasonable just so they could join the hunt club."

More likely it was "Doesn't matter what the judge says, we'll appeal until long after 389 has expired or until we make you irrelevant in the marketplace. Settle for a fraction of fair value or we'll crush you."

I'd love to be proven wrong. If TiVo is indeed in the club now, we should see significant, tangible results in 12-18 months. If we don't, then Rogers will be remembered as the CEO that killed TiVo, not the one who saved it.

Unless TiVo got one helluva deal in that room, it makes no sense to abandon a ten year old plan for a ten minute old one.
Sam doesn't like to bring up the fact that TiVo had their European patent revolked a couple of weeks before the settlement.

Where there's smoke there's fire.
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