Rovi is reported to be on the verge of buying TiVo, a company which only deviates in one letter from its own spelling, who we jokingly said when the Rovi name was coined, that it had simply copied TiVo, but spelt it wrong. The news has not been confirmed, but was broken by the New York Times, citing insider sources.
Given that TiVo only has an interim CEO, and that he has been at the company for some time, it looks like board members and shareholders had seen this coming, or potentially encouraged it. The deal will be sold as a merger and the TiVo share price has risen, but remains substantially discounted compared to other companies in TV technology with TiVo worth about $900 million, up $150 million on the news, while having $646 million in the bank, with more due on license deals.
This could mean a complete change of tack for TiVo, who’s CEO Tom Rogers, stood down after 10 years at its helm last quarter, among fears that network PVRs will eventually make disk based DVRs less attractive – that key patent which TiVo holds. Rovi is known for its ability to license its EPG and other patented technologies, and it would have a framework in place to pursue further patent revenues for TiVo. Whether or not it would continue with service TiVo owned service revenues would likely come under question.
Activist shareholders have encouraged Rovi management to consider the move, and have said so publicly in recent months. Rovi’s market cap it also way down on its previous highs of $2.5 billion or so, and today it is valued at $1.67 billion after acquisitions it made had to be unraveled at Sonic Solutions and DiVX, and it has also lost some EPG patent legal actions in Europe, resulting in less license revenues.
If such a deal goes ahead, Rovi will jhave to work out how it handles the integration of its Veveo Knowlege Graph acquisition, and DigitalSmiths the TiVo acquired recommendation company, although we suspect that the overlap is minimal and the two product lines may well be complementary.