TiVo Inc. (TIVO) Friday announced that it has settled its pending patent litigation with Motorola Mobility (MOT), Cisco Systems Inc. (CSCO) and Time Warner Cable Inc. (WC) for $490 million. Motorola Mobility is now owned by Google Inc. (GOOG) and Arris Group Inc. (ARRS). TiVo's board of directors also approved a $200 million stock buyback plan. TIVO is currently down about 17 percent in the morning trade as shareholders were looking for a higher cash settlement.
TiVo, the developer of digital video recorder, has agreed to enter into certain patent licensing arrangements with Arris, Cisco, and Google. Google and Cisco will pay TiVo the upfront payment, which will bring the total from awards and settlements related to the use of certain parts of TiVo's intellectual property to around $1.6 billion.
As part of the settlement, TiVo and Motorola, Cisco, and Time Warner Cable agreed to dismiss all pending litigation between the companies. TiVo will recognize a portion of the payment as past damages during the second quarter and the remainder over time.
TiVo expects net income and adjusted EBITDA to benefit from lower litigation spend in the remainder of its fiscal year ending January 31, 2014 and beyond.
Tom Rogers, CEO and president of TiVo stated, "We are pleased to reach an agreement that brings our pending litigation to an end and further underscores the significant value our distribution partners derive from TiVo's technological innovations and our shareholders derive from our investments in protecting TiVo's intellectual property."
Further, the company noted that this settlement significantly enhances its already strong balance sheet, bringing its cash position to over $1 billion before inclusion of future expected payments of at least $400 million from prior settlements.
The company intends to provide additional details regarding the timing of revenue recognition in its second quarter fiscal year 2014 earnings report.
TiVo announced its board has approved an expansion of stock repurchase authorization, doubling size to $200 million from $100 million. The Board has extended the stock repurchase plan for an additional two years until August 29, 2015.
This increased and extended repurchase authorization will result in over $160 million of unused stock repurchase authorization, the company said.
TiVo also intends to increase the size of its 10b5-1 trading plan significantly. This will allow the company to build on the almost $57 million worth of equity acquired through open market purchases and from tax withholdings on employee restricted share vesting since the board first authorized the $100 million stock repurchase plan.
TIVO is currently trading at $11.37, down $2.34 or 17.07 percent, on a volume of 17.37 million shares, against a three-month average volume of 2.29 million shares.
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