Tivo settles with Cisco, Motorola and Time Warner
NEW YORK (AP) -- 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 settlement fell well short of what most investors had expected, however, and shares of Tivo plunged 18 percent in morning trading 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.
"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," CEO Tom Rogers said.
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.
"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 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.
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 about $1 billion in combined settlements in similar cases against other companies, including Dish Network Corp., AT&T Inc. and Verizon Communications.
Tivo has still struggled to make money, however, posting annual losses in eight of the past 10 years.
Motorola Mobility, Cisco and Time Warner Cable said they were satisfied with the deal. Officials with Arris didn't immediate respond to an email seeking comment.
With Friday's deal, Tivo's awards and settlement from patent lawsuits total about $1.6 billion.
Following the announcement, Tivo said it would double its stock buyback authorization to up to $200 million and extended the plan for an additional two years.
Shares of Tivo fell $2.45 to $11.26 in extremely heavy morning trading, after dipping as low as $11.04 earlier in the day. Over the past 52 weeks, the shares have traded between $7.75 and $14.10.