TiVo (TIVO) bulls have long argued that the even though the company was getting lapped by knock-offs, it had a booster engine that would let it catch up: Patent rights that would force competitors to pay up or get out of the DVR businesss. Now they’re about to get proven correct, says Citi analyst Tony Wible.
Tony notes that the last phase of a long-running patent dispute wraps up Sept. 4 in a Texas courtroom, and gives TiVo a 75% chance of walking away from the fight victorious. Here’s his breakdown of the odds:
But the most intriguing possibility (at least for TiVo bulls) comes from a different Citi analyst. Jason Bazinet, who covers DISH, also concludes that TiVo is likely to win the case — which might prompt DISH to go ahead and buy the DVR-maker outright:
Given the downside potential to DISH, our Cable analyst Jason Bazinet (who also has a note out today on the trial) believes DISH may attempt to purchase TIVO at up to a 225% premium. We note that TIVO has anti-takeover provisions and would not likely sell for anything less than a massive premium.
The logic here: If TiVo wins, DISH either has to turn off all of its DVRs — unacceptable — or fork over a licence fee for each of the 4.5 million ones it has sold so far — expensive but doable. But for a few bucks more, Bazinet argues, DISH could buy TiVo outright. That would take care of its legal problems — and create headaches for its cable competitors, who may well have patent problems of our own.
Plausible? TiVo investors, an excitable bunch, certainly think so: They’ve bid shares up 7% today.
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