When the world proves you right after most people have told you otherwise, it is worth rubbing as many noses in it as possible and as a long term supporter of TiVo and its invention of the DVR, the sudden settlement of Motorola with TiVo in which anything up to $1 billion has been paid out, is yet another reason for Faultline to crow.
TiVo has at least one more major pay day from Cisco, which appears to be fighting on, but which in effect will be mostly involved in working out a payment scheme and a settlement. The Cisco infringement of TiVo’s DVR technology will be the most anticipated at TiVo. Not only did Scientific Atlanta claim for years that it did not need a license to TiVo technology because it had bought one from its defunct rival Replay TV prior to being acquired by Cisco, but its NDS acquisition also held a gun to TiVo’s head saying it would kick it out of DirecTV, its first major account and an account which sustained TiVo through the bad times, unless it agreed to be acquired.
NDS copied the technology and scheduled a replacement at DirecTV, but like most projects at NDS, it was massively delayed which gave TiVo a lifeline in its early days. Later NDS rolled it out as its own technology globally and even licensed other companies. TiVo was reluctant to sue NDS because it was owned at the time by News Corp, the company then controlling DirecTV. Since then DirecTV has moved under the control of John Malone’s Liberty Media, while NDS first was sold to Private equity and then acquired by Cisco. TiVo perhaps expects one more $1 billion plus pay day in court or out of it, where it will taste revenge as a dish served extremely cold (no pun intended on its first settlement with Dish).
One public estimate of the settlement was based on recent deals with AT&T and Verizon and put it at $939 million and TiVo had gone on record saying that these two cases should be worth $billions, so $1 billion each would be about right.
Luckily Arris, which acquired the part of Motorola that the lawsuit was aimed at, agreed in its purchase of the business, that it would only have to pay the first $50 million of any settlement. That means that the rest comes out of Google’s $2.35 million pay day for Motorola Home, that it received from Arris in December. That deal closed just last week and we always predicted that the TiVo settlement was always going to be the first priority. The trial was supposed to begin next week anyway, so there was a kind of legally imposed deadline too. Naturally neither side commented except to say a deal was done and they were all happy.
The key for TiVo is that it has said all along that if it was not involved in litigation it would be profitable, and it looks like very soon it can leave litigation behind. There are still outstanding cases against Time Warner Cable, but since it gets DVRs from Cisco, that could all end once that trial approaches.
The news of the deal jumped the TiVo price by 8% but that barely amounts to $150 million, and while this probably reflects that any payment made to TiVo will be over a period of quarters, with only some upfront, and will include future license fees which can’t be booked yet. But really if you were about to buy TiVo stock, you should buy it now before its next quarters’ balance sheet sees the light of day.