TiVo says it’s reached a deal to settle patent disputes with Cisco, Motorola and Time Warner Cable.
Tivo will get an upfront lump-sum payment of $490 million from Google and Cisco. TiVo will also enter into patent licensing deals with Cisco, Google and Arris Group Inc.
Google bought Motorola Mobility in 2012 and sold its set-top making unit to Arris this year.
TiVo Inc., based in Alviso, Calif., has been suing pay TV companies, saying that they are using its patented technology in DVRs. Last year, it reached a $250 million settlement with Verizon.
With Friday’s deal, its awards and settlement from patent lawsuits now total about $1.6 billion.
However, the news was not a boost for TiVo stock.
TiVo shares dropped as much as 21 percent in early trading after settling for less than estimated.
Tony Wible, an analyst at Janney Montgomery Scott in Philadelphia, had projected that the latest payment would be about $939 million, assuming six years of damages from Motorola DVRs that it said were infringing its patents.
The shares tumbled as low as $10.77 in premarket trading after closing at $13.71 yesterday in New York. The plunge more than erases TiVo’s 8.3 percent gain yesterday when news of the settlement first emerged.
The agreement averts a trial that was scheduled to start next week and eliminates some final holdouts in TiVo’s efforts to get DVR makers to license its technology. TiVo, which created the DVR market only to see competitors grab more customers, has collected more than $1 billion in patent royalties from Dish Network Corp., AT&T Inc. and Verizon Communications Inc.
Proving Worth
The company now has to prove it has a viable business “outside of collecting checks,” said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon, who has the equivalent of a hold on the shares.
Much of the company’s growth probably will come from selling its software and services in Europe, Hargreaves said yesterday. “If you strip out all the litigation payments and business costs, the business loses money.”
TiVo has waged more than nine years of litigation to get compensation for its inventions. Motorola Mobility and TiVo accused each other of infringing patents for DVR services in a case in Texarkana, Texas. Google, based in Mountain View, California, inherited the case when it bought Motorola Mobility last year.
Motorola Mobility is “pleased that all parties involved have reached an agreement to resolve pending litigation,” William Moss, a company spokesman, said in an e-mail yesterday.
In an October 2012 court filing, TiVo said it may be entitled to “billions of dollars” from Motorola Mobility, based on the number of television set-top boxes for New York- based Time Warner Cable.
Arris Group Inc., a cable-equipment maker, is buying Google’s Motorola Home business for $2.35 billion. Under terms of the acquisition, Arris would be responsible for no more than $50 million of the liability in any loss to TiVo, according to a regulatory filing by the Suwanee, Georgia-based company.
