Rovi Reports Mixed Q2 Ahead of TiVo Buy
In what was almost certainly the last earnings report before it acquires TiVo, Rovi reported mixed financial results for the second quarter. The company tallied revenues of $125.2 million in Q2, down 2% from the year prior, but higher than an average estimate from analysts of $119.31 million.
The service provider sector was a bright spot in the financial period, with revenues growing across both Rovi Corp. 's licensing and product business segments. Unfortunately for the company, those gains were not enough to offset revenue losses in the consumer electronics industry.
Rovi's total net loss was $9.4 million in Q2 versus a net loss of $3.3 million in the second quarter of 2015. The company's share price dropped immediately following the news from $18.39 to $17.51, but quickly rebounded a short time later.
Highlights from the quarter include a new licensing agreement with Verizon Communications Inc. (NYSE: VZ) and increased growth in Rovi's analytics business. The company signed five new customers for its Operator Insights product, and while CEO Tom Carson noted that revenues for the nascent business segment are still small, Rovi is "very very positively encouraged by the direction that it's going."
Of course the biggest issue on the earnings call was one that Rovi couldn't address in great detail. Rovi expects to close its acquisition of TiVo Inc. (Nasdaq: TIVO) in Q3, which, assuming it happens, will roughly double the size of its business. Shareholders still have to approve the transaction, but regulators have already given their okay. (See Rovi/TiVo Merger Gets FTC, DOJ Nod.)
There are numerous pros to the deal, including the combined strength of both companies in the pay-TV sector and the advantage of combining resources in the analytics market. However, there are issues to watch as well as Rovi and TiVo continue to face their own individual challenges. Rovi, for example, is currently suing Comcast Corp. (Nasdaq: CMCSA, CMCSK) for patent infringement and may be stuck in court over the issue for several years. Meanwhile, TiVo's retail sales have declined significantly in recent years, and it's unclear what strategy might save the ailing business. (See What's Next for Rovi & TiVo?.)
As in any acquisition deal, there's also always the concern that the integration process could prove more difficult than expected. According to Rovi executives, the two companies have already started integration planning, but will have to wait until the deal is done to discuss longer-term strategy.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading