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TiVo Earnings Soar After Patent Settlement

TiVo (NSDQ: TIVO) had a great quarter-no surprise, since the numbers include a big chunk of the $500 million patent settlement it won from DISH Network and Echostar (NSDQ: SATS). The first payment propelled TiVo to a $139 million net profit, compared to a loss of $14.2 million in the same quarter last year.

TiVo also reported some improvements in its business outside the courtroom, highlighting its recent deal with Virgin Media (NSDQ: VMED) as one example. Still, it’s the big court victory that sealed the deal here. TiVo wouldn’t have been profitable this quarter without that first big patent payment, which was $175.7 million. The settlement payments will be paid on a schedule that stretches through 2017.

Other points that came up during the earnings call:

»  As for TiVo’s ongoing patent battles with AT&T (NYSE: T) and Verizon, company executives said they’re doing just fine. The makers of those two companies’ DVR boxes, Microsoft (NSDQ: MSFT) (for AT&T boxes) and Motorola (NYSE: MMI) (for Verizon boxes) have joined the defense and used some of their own patents to counter-sue TiVo, but TiVo general counsel Matt Zinn downplayed those counter-attacks. “People are going to throw all kinds of stuff back at us,” said Zinn. “Our pats have survived challenge after challenge after challenge.” He also noted that AT&T and Verizon sell more DVR boxes than TiVo, which means they actually have more to lose in litigation. “I don’t think it’s an even risk profile here,” he said. “I don’t think I can say much more than that.”

»  TiVo continues to keep $19.99 per month as the price point for its service, meaning it will continue to be a substantially more expensive service than DVR’s offered by cable companies. It’s positioning itself as a “premium product” with “superior features, relative to generic DVRs,” said TiVo President and CEO Tom Rogers.

»  There’s no question the DISH settlement gave TiVo a new lease on life, and the company will be around for years to come. But the road to profitability still isn’t completely clear. When will the company have a great quarter that’s not tied to a major legal victory? Next quarter, when things settle back down to normal, the company is anticipating a net loss of $25 million to $27 million-even with licensing money from the DISH settlement.