TiVo Settles Patent Litigation, $490 Million Payment Less Than Expected

Andrew Klips |

TivoDigital video recorder maker TiVo Inc. (TIVO) said Friday morning that it has settled its pending patent lawsuit with Motorola, Cisco (CSCO) and Time Warner Cable (TWC). Motorola was bought by Google, Inc. (GOOG) in 2012, whom then sold the set-top making segment to Arris Group Inc. (ARRS) this year, bringing both of those companies into the mix.

Per the settlement, Google and Cisco will pay San Jose, California-based TiVo a lump sum of $490 million. Additionally, TiVo will enter into patent licensing deals with Google, Cisco and Arris. The settlement amount was far less than the more than $900 million settlement Wall Street was expecting.

All pending litigation will be dismissed between TiVo, Motorola, Cisco and Time Warner with the settlement.

The latest agreement raises the total of awards and settlements related to TiVo’s intellectual property to about $1.6 billion. TiVo reached a $500-million agreement with Dish Network Corp. (DISH) and its former unit EchoStar Corp. (SATS) in 2011. Another settlement was reached last year with AT&T Inc. (T) that added a minimum of $215 to corporate coffers.

TiVo will recognize a portion of the payment as past damages during the second quarter and the remainder over time. The company also expects improvement in net income and adjusted EBITDA due to lower litigation expenses.

"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, chief executive and president of TiVo.

Rogers added that the company intends to use its substantial capital resources to drive shareholder value through share repurchases. TiVo’s board approved doubling the authorization of its current share buy-back plan from $100 million to $200 million and extension by two years to August 29, 2015.

Additionally, TiVo intends to increase the size of its 10b5-1 trading plan significantly also, meaning that between the two plans TiVo will have over $160 million of unused stock repurchase authorization.

Shares of TiVo rose on Thursday as news of the settlement arrive, but without details. Those gains evaporated with the less-than-expected dollar value of the settlement as shares of TIVO have jettisoned about 18 percent in early trading Friday to around $11.15 per share.

The stock price is still ahead nearly 40 percent in the past year, although the nosedive today has taken the stock about 8 percent into the red for 2013.

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Companies

Symbol Name Price Change % Volume
DISH DISH Network Corporation 58.64 0.13 0.22 1,694,492
TWC Time Warner Cable Inc n/a n/a n/a 0
SATS EchoStar Corporation 52.64 0.64 1.23 96,509
CSCO Cisco Systems Inc. 29.95 0.62 2.11 30,180,093
GOOG Alphabet Inc. 771.19 12.08 1.59 1,760,966
TIVO TiVo Inc. 21.00 0.85 4.22 668,600
ARRS ARRIS International plc 29.99 1.11 3.84 3,015,263
T AT&T Inc. 40.45 1.10 2.80 32,963,365
MCV Medley Capital Corporation 6.125% Senior Notes due 25.34 -0.16 -0.62 2,200

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