JP Morgan raises TiVo to overweight

Sept 4 Tue Sep 4, 2012 7:47pm IST

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Sept 4 (Reuters) - JP Morgan Securities raised TiVo Inc to "overweight," citing strong subscriber growth and expectations of a favorable outcome for its patent dispute with Verizon Communications Inc next month.

TiVo's shares rose 5 percent in morning trade on Tuesday on the Nasdaq.

TiVo, which sells set-top boxes and licenses its digital video recording (DVR) technology to cable operators, reported better-than-expected second-quarter results last week on higher sales of its video recorders.

The number of TiVo subscriptions across the globe grew 41 percent year-over-year during the quarter, led by growth at Virgin Media Inc.

The company is adding customers like cable operators Com Hem in Scandinavia and GCI in Alaska, and is poised for higher adoption for its technology at ONO in Spain, Charter and ComCast Corp, analyst Paul Coster wrote in a note, raising his rating on TiVo stock from "neutral."

TiVo's advanced TV solutions, which integrate broadcast programming, video on demand and internet video with interactive ad content, appeal to smaller cable operators that need to defend against encroachment by new home entertainment rivals like Google and Apple Inc, Coster said.

TiVo owns hundreds of patents and regularly sues other companies. A good chunk of its revenue comes from litigation settlements.

It had earlier this year reached a patent-related settlement with Verizon's rival AT&T Inc under which the mobile service provider agreed to pay TiVo a minimum of $215 million and monthly licensing fees.

The trial in the Verizon case is scheduled to begin on Oct. 1.

"We believe a Verizon settlement in excess of $200 million is possible but if this case goes to trial potential outcomes range from zero through multiples of $200 million," he said.

Billionaire Charlie Ergen-led Dish Network Corp and EchoStar Corp also agreed to pay TiVo $500 million to settle a patent dispute in May.

TiVo also licenses its digital video recording technology to DirecTV, RCN and Suddenlink.

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