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TiVo Sees Some Headwinds Coming

Despite strong continued growth prospects and overall revenue gains, TiVo is facing several headwinds in the new year, including a protracted legal battle with North America's biggest cable operator.

In their fourth-quarter earnings call late Wednesday, TiVo Inc. (Nasdaq: TIVO) executives ticked off the various headwinds they expect to encounter in 2017, including lower hardware sales, lower licensing revenues for their ACP content protection system and the expected absence of any "one-time catchup revenues" in the coming months. They also don't expect any IP licensing revenue from Comcast Corp. (Nasdaq: CMCSA, CMCSK) as TiVo and the MSO continue to battle in court over the latter's alleged infringement of TiVo's patents. (See TiVo Turns a Profit Post Rovi Deal.)

Noting that Comcast is the only one of the top ten US pay-TV providers without an IP licensing pact in place following recent deals with Verizon Communications Inc. (NYSE: VZ) and Dish Network LLC (Nasdaq: DISH), TiVo President and CEO Tom Carson said his company still hopes to work out a deal with the giant MSO but has no idea if or when that might happen. "We continue to work on getting Comcast under license even if it requires seeing the pending litigation through the conclusion," Carson said, according to a Seeking Alpha transcript of the company's earnings call. "While we would prefer a commercial agreement and remain open to discussions on that front, we are prepared to continue enforcing our rights through litigation."

On the upside, TiVo continues to push its software into more pay-TV set-tops and other video devices and integrate OTT services into its set-tops. On the earnings call, company officials highlighted the recent launch of a TiVo-powered 4K/UHD set-top by Virgin Media Inc. (Nasdaq: VMED) in the UK, a five-year pact with Samsung Electronics Co. Ltd. (Korea: SEC) to put its software in mobile handsets and content integration agreements with Netflix Inc. (Nasdaq: NFLX) and Home Box Office Inc. (HBO) . In addition, TiVo officials said they have swung a deal with an undisclosed "large international service provider" to deploy the company's next-gen user experience in early 2017. (See TiVo & Netflix Ink Licensing Deal.)


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TiVo also continues to make progress with its merger integration following Rovi's purchase of TiVo last September and rebranding of the combined company as TiVo. Carson said the company "exceeded our synergy targets in Q4" and is "on track to achieve over $100 million in annual cost synergies."

For the fourth quarter, TiVo reported revenue of $252.3 million, up 69% from the year-earlier period because of the Rovi-TiVo combined results. But quarterly net income fell to $9.8 million, down from $26.3 million a year ago.

For the full year, TiVo posted $649.1 million in revenue, up from $526.3 million a year ago, once again due to the merger. Net income for all of 2016 came in $37.2 million, reversing a loss of $4.3 million in 2015.

Despite the highlighted headwinds, TiVo said it expects to clear $800 million in revenue this year. It said 23 million households around the world now use its "advanced television experiences."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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