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TiVo reports profit due to patent suit settlement

Tue, 05/24/2011 - 2:05pm
RACHEL METZ - AP Technology Writer - Associated Press

TiVo Inc. reported a quarterly profit on Tuesday after booking proceeds from the settlement of a digital video recorder patent lawsuit with Dish Network Corp. and set-top box supplier EchoStar Corp.

For the quarter that ended April 30, TiVo — which sells set-top boxes that record, pause, rewind and fast-forward live TV and licenses its technology to cable companies for their own set-top boxes — earned $139 million, or $1.04 per share. That compared with a loss of $14.2 million, or 13 cents per share, in the year-ago quarter.

The Alviso-based company's profit stemmed from $175.7 million in litigation proceeds it received from Dish and EchoStar, which said in early May that they would pay TiVo $500 million to settle a patent the patent suit, making it one of the largest-ever patent settlements. TiVo originally filed against Dish in 2004. Dish spun off EchoStar in 2008. Both Dish and EchoStar are controlled by Charles Ergen, the chairman and CEO of Dish.

Sales of TiVo-branded DVRs have plummeted as cable and satellite companies have added DVR functions to their set-top boxes. Some companies, such as DirecTV Group Inc., made deals with TiVo. Others, such as Dish, had held out.

The proceeds are part of the $300 million TiVo has received so far from Dish and EchoStar. The remaining $200 million will be distributed in six annual installments between 2012 and 2017. Dish and EchoStar get licenses to use the DVR technology. In return, EchoStar is granting TiVo a license to use some of its patents.

In an interview, TiVo CEO Tom Rogers called the settlement a "great resolution."

"We've removed the question mark of whether there's value to our intellectual property," Rogers said.

He said TiVo, which still has several ongoing patent lawsuits with companies including Microsoft Corp. and Verizon Communications Inc., is determining what to do with the settlement proceeds, including a possible share buyback.

But while TiVo's bottom line benefited from the suit settlement, its revenue dropped nearly 26 percent to $45.8 million. That missed forecasts of analysts polled by FactSet, who were looking for $48.1 million in revenue.

Revenue fell across TiVo's segments, with the company's largest revenue source, service revenues, falling 8 percent to $33.3 million. The steepest decline came from hardware revenues, which fell 62 percent to $6.9 million.

TiVo's legacy business of selling set-top boxes has been declining, and the company is focusing more on licensing its software to cable companies.

TiVo shares fell a penny to $9.40 in extended trading. The stock finished regular trading up 5 cents at $9.41.

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