Following prolonged discord between Verizon Communications Inc. and TiVo Inc. over the latter’s DVR technology, an agreement has finally prevailed, after the two technological heavyweights came to a mutual understanding. In exchange for dismissing the expensive and lengthy litigation process, the two have agreed that they will cross-license their patents through a step by step process that will compel Verizon Communications Inc. (NYSE:VZ) to be the first one to dip into its pocket. This agreement has sent TiVo Inc. (NASDAQ:TIVO)’s stock on an abrupt upswing, jumping 10 percent (at the time of writing).
Verizon Communications Inc. (NYSE:VZ) will have to pay a total of $250 million, $100 million of which, will directly dig into its cash reserve as a non-negotiable upfront amount. The pending $150.4 million will be paid through recurring quarterly payments till July 2018. In addition to that, there will be additional monthly fees for FiOS DVR users who exceed certain levels.
Last year, in a more or less similar move, TiVo Inc. (NASDAQ:TIVO) reached a $500 million settlement with Dish networks. Earlier this year, TiVo yet again, settled a $215 million lawsuit against AT&T, Verizon’s core competitor. As if this is not enough, TiVo currently has pending lawsuits against Time Warner Cable Inc (NYSE:TWC), Google’s Motorola, and Cisco Systems (NASDAQ:CSCO).
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This move with Verizon Communications Inc. (NYSE:VZ) simply highlights TiVo’s swelling desire to avoid litigation in favor of out of court settlements.
Steve Cohen’s increased stake- positive investor sentiment?
Steve Cohen’s hedge fund, SAC Capital, towards the end of August, increased its stake in TiVo to 5.2 percent, increasing its share base from the previous 2 million shares, to the current 4.4 million shares. Cohen’s move, coupled with today’s 10 percent jump in TiVo’s stock, highlights the increased positive outlook towards TiVo Inc. (NASDAQ:TIVO).
While it is difficult to pinpoint all the primary contributory factors behind the increased demand for TiVo’s stock, a guided guess suggests that investors are impressed by the fashion through which the company handles litigation.
Cohen’s hedge fund for instance, increased its stake, despite the pending TIVO litigations, suggesting that it had confidence in TiVo’s way of handling the lawsuits and in particular, the Verizon lawsuit, which was scheduled for trial in October of this year.
In light of Cohen’s earlier move and the Verizon Communications Inc. (NYSE:VZ) agreement, shareholders are eager to buy TiVo Inc. (NASDAQ:TIVO) shares.
As of the moment, speculation is rife, and laymen and pundits alike are glued to the edges of their seats, waiting for the next move. Analysts are also waiting to see if the pattern of outside court settlements will hold with regard to Cisco Systems, Inc. (NASDAQ:CSCO), Motorola Solutions Inc (NYSE:MSI), and Time Warner Cable Inc (NYSE:TWC).