Shares plummeted about 18% in early trading after the DVR pioneer disclosed that it accepted $490M — far less than the Street anticipated — to settle its patent infringement suits with Motorola, Cisco, and Time Warner Cable. TiVo says that it will use the cash to double its stock repurchase effort, to $200M, and extend it for two years to August 2015. Still, analysts were stunned; many had expected TiVo to collect twice as much to settle just the Motorola case which was scheduled to go to trial next week. Shares rose 8.3% yesterday when news of a settlement broke. Lazard Capital Markets’ Barton Crockett downgraded TiVo to “neutral” this morning saying that the $490M payment is “way below our estimate of $1.7B to come from both” cases. Susquehanna Financial Group’s Thomas Claps says the deal “indicates that TiVo was more fearful of its litigation prospects than it appeared.” He adds that “TiVo has spoken at length about how this [Motorola] case is bigger than [settlements with] EchoStar, AT&T and Verizon combined — and those cases resulted in $1B+ cash to TiVo.” Company CEO Tom Rogers cast the settlement as a clear win for his company. It includes licensing agreements with Motorola owners Google and Arris, as well as Cisco, and Time Warner Cable. That “further underscores the significant value our distribution partners derive from TiVo’s technological innovations.” In addition, he says, the cash “significantly enhances our already strong balance sheet.” The disputes involved TiVo patents patents for common processes including the ability to watch one show while recording another.
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