--TiVo settles patent suits involving Google, Cisco and Time
Warner Cable
--TiVo to receive $490 million from Google and Cisco, below
market expectations
--Stock plummets premarket
(Adds more details on settlement, market expectations and stock
movement.)
By Ben Fox Rubin
TiVo Inc. (TIVO) said it will receive an upfront lump-sum
payment of $490 million from Google Inc. (GOOG) and Cisco Systems
Inc. (CSCO) to settle patent litigation with both companies.
However, the TV set-top box maker's stock plummeted 19% to
$11.17 premarket, as the settlement amount looks to be well below
market expectations. As of Thursday's close, the stock had been up
11% so far this year.
Susquehannna Financial Group had projected the settlement with
Google's Motorola unit alone to come in at $500 million to $1
billion, while Janney Capital Markets estimated $300 million to
$600 million for the Google settlement.
Cisco said separately in a Securities and Exchange filing that
it will pay TiVo a lump sum of $294 million--leaving Google to pay
the remaining $196 million.
Meanwhile, Google's Motorola unit on Thursday had confirmed that
it reached a settlement deal with TiVo, though terms of the
agreement weren't immediately disclosed. The patents TiVo initially
sued Motorola over included technology encompassing a digital video
recording and playback device and methods for more efficiently
playing recorded video.
As part of the settlement, which also involves Time Warner Cable
Inc. (TWC), TiVo agreed to enter into patent licensing deals with
Cisco, Google and Arris Group Inc. (ARRS).
In conjunction with the deal, TiVo's board decided to double the
size of its stock buyback program to $200 million and extend its
deadline by an additional two years to August 29, 2015.
TiVo has mostly posted losses since the second half of 2009, but
has seen positive returns from its legal efforts, reaching
settlements with companies including AT&T Inc. (T), EchoStar
Corp. (SATS), Dish Network Corp. (DISH) and Verizon Communications
Inc. (VZ).
Two years ago, Dish Network and its former unit EchoStar agreed
to pay TiVo $500 million to settle their seven-year patent dispute.
In January 2012, the company also got at least $215 million as part
of a settlement with AT&T.
TiVo Chief Executive Tom Rogers said Friday the latest
settlement further enhances the company's balance sheet, bringing
its cash position to over $1 billion.
"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," he said.
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 its second quarter and the remainder over time. The
company also expects its profits for the rest of the fiscal year
and beyond to benefit from lower litigation spending.
BMO Capital Markets analyst Edward Williams said Friday that in
addition to the Cisco settlement coming as a surprise, many
event-driven investors looked to be exiting the stock now that the
two major patent suits were over, exacerbating the selloff.
He said BMO was expecting the Google settlement to come in at
$300 million to $500 million and the Cisco settlement to be about
two-thirds of that amount.
Google and Cisco representatives weren't immediately available
for comment.
Last month, TiVo said its fiscal first-quarter loss narrowed as
it continued to increase its subscriber rolls and company reported
stronger revenue.
--Ian Sherr and Drew FitzGerald contributed to this article.
Write to Ben Fox Rubin at ben.rubin@dowjones.com
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