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Rovi shares rise as analyst handicaps legal wins

Fri, 08/03/2012 - 3:00pm
The Associated Press

Shares of TV listings company Rovi Corp. rose on Friday after an analyst said the company's stock could rise above $20 if legal battles over patents are resolved in its favor.

The gains came even after a quarter that the company acknowledged was a "disappointment."

THE SPARK: Pacific Crest analyst Andy Hargreaves said in a research note Friday that favorable outcomes in patent lawsuits could result in a fair value for shares of $20 or higher, while negative outcomes would result in shares being worth about $10.

His current fair value on the stock is $15.44.

The company also reported second-quarter earnings that were below lowered expectations spurred by a company warning on July 17.

Its net loss expanded to $18.5 million, or 17 cents per share, from $10.7 million, or 10 cents per share, last year's second quarter. Adjusted earnings came to 37 cents, short of the 40 cents expected by analysts polled by FactSet.

Revenue fell 12 percent to $158.3 million, short of the $159.9 million expected.

THE BIG PICTURE: Rovi says it holds more than 5,100 issued or pending patents worldwide. Many have to do with interactive TV guides, listings data and technologies that seek to protect digital video content. Much of its revenue comes from licensing its technology to consumer electronics manufacturers or video providers. On Thursday, it said it struck a deal with Google Inc. to license its interactive guide patent portfolio for set-top boxes and online and mobile platforms for Google's fiber pay-TV service.

THE ANALYSIS: Hargreaves estimated that favorable settlements to patent lawsuits would boost his estimate for 2013 earnings before interest, taxes, depreciation and amortization to $309 million from his current estimate of $279 million.

He also predicted that would spark an increase in market value placed on the company's earnings to 7 times from 5.5 times currently.

Unfavorable outcomes would cut 2013 earnings to $245 million and cut the value placed on them to 4 times earnings, Hargreaves said.

SHARE ACTION: Rovi Corp. shares rose $1.19, or 8.9 percent, to $14.57 in afternoon trading Friday. They have dropped considerably from a 52-week high of $51.83 last October.

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