Tivo Ripe for Buyout?

The patent infringement lawsuit against EchoStar (parent company of Dish Network) ended on Friday, resulting in the jury awarding US$74 million to TiVo as compensation for lost royalties and profits. Echostar was found to have used technology covered by TiVo patents to power its own DVR boxes.

The outcome of this lawsuit is likely to set a precedent for other legal actions, and to "encourage" other DVR providers such as DirecTV (whose agreement to provide TiVo-branded services was recently extended) and Time Warner Cable to adopt true blue TiVo technology


Barron's published an article over the weekend where TiVo was portrayed as a desirable buyout candidate. The article says that "the product's technology, which the company continually improves, could make TiVo a buyout candidate for a computer maker interested in enforcing the patents, or a cable operator looking for an edge." The one-two punch of the patent suit and the takeover speculation pushed the stock 12 percent higher today over Friday's closing price.

Of course, takeover speculation is nothing new for TiVo. The company has been rumored to have lined up interested buyers many times in the past, but what makes this round interesting is the timing of this supposition. The stock is hitting price points higher than at any time since early 2004, so it's certainly not the discounted sale item of the week. Companies trading at historically cheap prices are usually seen as better targets for a buyout.

But the patent victory certainly increased the value of TiVo, and now the market needs to figure out exactly how much it's worth nowadays. Not only does the lawsuit payout suggest that TiVo could see its first profitable year of operation, but the result should lead to an increase in patent licensing revenue. And the "moat," TiVo's competitive advantage over its competitors, was just widened a smidgeon as well. Even in the face of appeals, court victories are worth something because each appeal must overcome another precedent set by the lower court.

Read the complete ars-technica article