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TiVo Might Do the Splits

Jeff Baumgartner
1/28/2019

As it gets into the late stages of a strategic review of its overall business, TiVo is leaning toward splitting out its intellectual property and licensing business and its products and services business, sources familiar with the situation tell Light Reading.

TiVo Inc. (Nasdaq: TIVO) hasn't announced a final plan. But during the company's Q3 call in November, interim CEO Raghu Rau stressed that the process was taking longer than hoped, given the "unique nature of our business," and that TiVo was continuing to "explore all possible strategic alternatives." (See TiVo Tweaks Interim CEO Package as Future Remains in Flux.)

At the time, Rau said TiVo was in "various active discussions" and that the company intended to wrap up the strategic review process in time for its Q4 2018 earnings call. That call is expected to be held sometime next month.

TiVo, which completed its $1.1 billion merger with Rovi in the fall of 2016, has been mulling the future direction of its business for nearly a year. TiVo announced in February 2018 that it was exploring a wide range of strategic alternatives aimed at driving shareholder value. TiVo, which hired LionTree Advisors to help with the evaluation of its business, said then that it is open to several options, including "transformative acquisitions," combining TiVo's business with other players, or taking the company private.

TiVo, Light Reading is told, is leaning toward splitting the company's IP/licensing business and its products and services unit. If TiVo opts to take that route, it's not clear if those units would become separate, publicly traded companies, go private, or if TiVo would spin off its products and service unit and ultimately seek a buyer for it.

TiVo, which moved to outsource the hardware piece of its retail business last year, has openly discussed the idea of selling its products business, which includes the data and content discovery and recommendation service it acquired from Digitalsmiths some five years ago. Speaking on an earnings call last August, Rau characterized the combination of TiVo's products with another company as an idea that was getting the most traction. "I think [that option] is a very strong possibility, and that is certainly something we are evaluating," he said then, but stressed that TiVo was "not ruling anything out at this stage." (See Tivo Might Sell Off Its Products Business and Tivo's Done With Hardware.)

For now, TiVo isn't shedding any more light on what it might do as the review of its business continues.

"As we stated on our last earnings call, it is our intention to complete the strategic review process by our fourth quarter and year-end 2018 earnings call," TiVo said in a statement. "Unless we have something formal to announce, TiVo will not be commenting on this matter before that time."

Both sides of TiVo's business have been struggling. TiVo posted Q3 total net revenues of $164.7 million, down 17% year-on-year. Total product sales were down 9%, to $94.61 million, while total IP licensing revenues dropped 26%, to $70.09 million.

The bulk of TiVo's IP licensing revenues in Q3 ($44.47 million) came way of deals with US pay-TV providers, balanced out by licenses with CE manufacturers ($8.8 million), and international pay-TV providers and "other" sources ($16.76 million).

An overhang in TiVo's IP and licensing business is its failure so far to secure a new deal with Comcast Corp. (Nasdaq: CMCSA, CMCSK), and litigation between the companies has continued as a result. Notably, the last of TiVo's Time Warp patent agreements, once a cash cow for the company, expired in July 2018. (See TiVo-Comcast Legal Fight Has No End in Sight.)

— Jeff Baumgartner, Senior Editor, Light Reading

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