TiVo's Fortunes Rise on Echostar Win

Posted by: Cliff Edwards on October 06, 2008

Amid a sea of red Oct. 6 on the U.S. stock exchanges with the Dow plunging below 10,000 and the Nasdaq faring no better, TiVo was one of the few companies to see its fortunes rise in trading. The company’s 2% gain to $6.41 a share came after the U.S. Supreme Court declined to hear an appeal on a patent infringement ruling won by the digital video recording pioneer.

A federal appeals court earlier this year ruled that digital video recorders offered by satellite provider Dish violate software patents held by TiVo. A lower court earlier had issued a permanent injunction against Dish that would have required the satellite provider to shut down some 3 million DVRs. Dish, formerly named Echostar Communications until it split its hardware and programming arms late last year, says its newer DVRs do not infringe on TiVo’s patents.

When Dish, which has been fighting TiVo since 2004, finally decides to fork over the $74 million judgment, it will hardly affect the company’s bottom line. After all, TiVo continues to lose money nearly 10 years after it began letting consumer pause, rewind and skip through programming and commercials. The company in late August lowered its guidance to Wall Street, suggesting it will post a third-quarter net loss of between $7 million and $9 million.

But the high court’s decision not to take up the case is likely to serve notice on other vendors of digital video recorders that they may first need to talk to TiVo about licensing key pieces of software.

Cable companies such as Comcast and satellite provider DirecTV recently have formed partnerships to offer some customers the option of DVRs with TiVo software installed. And the Alviso (Calif.) company has been moving to make its services available elsewhere by partnering with CD-burning company Nero to bring the interface to the pc, and Research in Motion to bring customized TiVo services to the Blackberry smartphone platform.

TiVo hopes to gain more overall subscribers through such deals. That way it can expand service offerings to differentiate itself from other DVR providers. For instance, TiVo plans in coming weeks to let subscribers to its standalone digital media recorders automatically record TV programs listed on magazine Entertainment Weekly’s recommended viewing list.

TiVo also recently expanded its relationship with online retailer Amazon to let broadband-connected subscribers purchase all manner of products off their set-top box.

While investors likely would take a string of quarterly profits over all these things, they seem to taking solace in the fact that the Dish decision at the very least points TiVo in the right direction.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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