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TiVo Signs Expanded IP Licensing Agreement With LG Electronics

Zacks Equity Research

TiVo Corporation TIVO recently announced that it has expanded its global intellectual property (IP) license agreement with LG Electronics (LG). The deal expands LG’s previous deal for Rovi patent portfolio license to presently cover the TiVo patent portfolio.

The new pact is expected to enhance the ability of LG’s customers to “discover and enjoy entertainment content on multiple devices.”

This news comes on the heels of TiVo announcing a multi-year extension of its agreement with Shaw Communications SJR for TiVo’s i-Guide and IP license. Shaw also stretched its Rovi patent portfolio IP license to include the TiVo patent portfolio now.

Notably, TiVo is banking on new contracts to turn around its fortunes. While shares of TiVo have declined 23.3% in the year-to-date period, its industry dipped 0.5%.

Focus on IP Licensing

TiVo on its last earnings call announced that it is separating its product division from its IP licensing unit. Per management, post this spin-off, the company will be an IP Licensing business consisting of Rovi and TiVo Patent Portfolios and other IP Licensing assets.

The spin-off, aimed to maximize shareholder value, is likely to be completed in the first half of 2020. The company believes that by operating independently, the two businesses will be better off to pursue the abundant market opportunities.

In the last reported quarter, IP Licensing revenues, which contribute to 42% of the total revenue stream, fell approximately 8% year over year to $66.9 million due to the expiration of the Legacy Time Warp agreements.

Under the IP Licensing segment, on a year-over-year basis, revenues from Consumer Electronics Manufacturers like LG dipped 4% to $8.6 million. While revenues from International Pay TV providers increased 15% to $16 million, revenues from the U.S. Pay TV Providers decreased 16% to $42 million.

We believe, recent deals with the leading entities alongside new customer wins, product launches and international expansion will drive top-line growth. Continued license agreements and renewals bode well for growth. Evidently, the deals could help the company gain a larger market share by providing it with the necessary competitive edge.

Zacks Rank & Stocks to Consider

TiVo currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Rosetta Stone RST and Alteryx AYX, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone and Alteryx is currently projected at 12.5% and 13.7%, respectively.

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Shaw Communications Inc. (SJR) : Free Stock Analysis Report
 
TiVo Corporation (TIVO) : Free Stock Analysis Report
 
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