Will These Tech Giants Buy Out TiVo?

Bloomberg reports that TiVo (NASDAQ:TIVO), after recently winning a seven-year patent dispute with Dish Network (NASDAQ:DISH) that resulted in a $500 million settlement, may now be a takeover target for tech leaders like Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) or Rovi Corp. (NASDAQ:ROVI). The company has gained a much more stable outlook following its legal victory, having retained a clear-cut advantage in its intellectual property holdings, particularly in relation to the company’s live recording and playback technology. Bloomberg estimates the company could be sold at a price of $20 per share, indicating a market cap of $2.41 billion. The stock is currently trading at $10.69 per share.

TiVo, which has only reported one annual profit in its fifteen years of operation, thanks to cash inflow from legal victories in 2009, may be profitable again in 2011 thanks to the DISH settlement. The company also expects to win ongoing disputes with AT&T (NYSE:T) and Verizon (NYSE:V). TiVo will reportedly make up to $21 million in net profits this year, with its largest revenue streams emerging from court-ordered settlements. According to the company’s regulatory filings, TiVo’s customer base has been flocking from the service in droves, seeking cheaper or generic alternatives in Netflix (NASDAQ:NFLX) and others. In 2007 the company lost more than half of its annual users.

Google seems to be the current frontrunner in talks of a potential takeover, as rumor has it the search giant is looking to expand its tech empire by breaking into digital media. A potential project in the works, Google TV, would benefit greatly from access to TiVo’s coveted intellectual property resources. “If you were to combine the two, you’d have a very powerful set of patents and technology — all around living room digital media,” says one writer. Another analyst expresses more skepticism over a possible TiVo sale, citing concerns that when the company’s patents expire, the revenue stream will be dead in the water. “It’s easy to be a bear on TiVo because they’re not making any money and their cash cow is getting older and slowly dying.” Bloomberg adds a discouraging note for the company: “Bearish bets against the stock climbed last month to the highest since Lehman Brothers Holdings Inc. collapsed in September 2008.”