Who Will Buy TiVo?

Shares of TiVo (Nasdaq: TIVO  ) climbed 5% higher on Friday, after a Bloomberg article speculated that a buyout is in the works.

We're just dreaming out loud at this stage. The catalyst to the article was a Maxim Group analyst arguing that TiVo could be worth as much as $2.4 billion -- or $20 a share -- to a potential acquirer.

The move makes sense. TiVo's patent-affirming victory over DISH Network (Nasdaq: DISH  ) earlier this year was a big one. It's not just about the money, as TiVo stands to collect more than $600 million in monetary damages over the next few years. It's not even about the other settlements and damages that will inevitably follow. Most of the cable and satellite television providers are playing nice with TiVo's DVR patents. Those that aren't -- more specifically AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) -- have to assume that they'll be as red-handed as DISH.

Buying TiVo isn't about the brand or the product, as TiVo's declining subscriber counts and pre-settlement deficits would collect dust at the corner yard sale.

Approaching TiVo as a buyout candidate is all about valuing intellectual capital over decaying fundamentals.

Don't get me wrong. TiVo is doing a lot of cool things, but its real value at this litigated juncture is all about its patents.

Bloomberg boils down the pool of potential -- and hypothetical -- buyers to Google (Nasdaq: GOOG  ) , Microsoft (Nasdaq: MSFT  ) , and Rovi (Nasdaq: ROVI  ) .

It's easy to picture DISH or any of its TiVo-paying rivals as raising bidding cards early in any dream auction, but antitrust regulators might not smile kindly on the abusive scenario this may present. Bloomberg's murderer's row seems far more feasible.

Rovi to the rescue?
Rovi may be the dark horse, but it also makes the most sense. Rovi is no stranger to the value of intellectual property when it comes to entertainment software. The provider of interactive program guides for Web-tethered televisions and the company behind the Roxio line of digital media software has thousands of patents in its pockets.

The one thing that Rovi lacks relative to Google and Microsoft is tens of billions in the bank. This wouldn't get in the way of a deal. TiVo's encouraging stream of future royalty licensing payments will make it easy to line up financing if Rovi has to come up with an all-cash offer to keep up with the dot-com behemoths.

Big G wants a way into your living room
Google TV has been a hard sell for the world's leading search engine that typically gets what it wants. Price cuts on behalf of its hardware partners haven't really moved the needle. TiVo on Google's arm would help open doors with the content makers that have largely shunned Big G over the past year. After all, if the cable and satellite giants have to play nice with a Google-owned TiVo, Tinseltown isn't going to get in the way.

Would a deficit-plagued TiVo be a pair of concrete shoes for Google's high-margin ways? Perhaps, though Google would be quick to outsource the hardware end of the business, just as it has in the smartphone, tablet, and Google TV realms. Google's interest here is in a popular platform that it can monetize with target ads. TiVo's software underbelly is a great match.

Mr. Softy is a couch potato
PC operating systems and productivity suites may be Microsoft's bread and butter, but the growing success of its Xbox and Xbox Live digital marketplace find some people interacting more with the world's largest software company through the boob tube than the PC box.

TiVo isn't as easy a tile to fit in Microsoft's mosaic as it is for Rovi and Google, but it's easy to see the tactical interest if it means keeping it away from Google.

Rovi, Google, and Microsoft all make sense as players here, but we can't take this seriously until TiVo is open to dealing or any potential buyer makes its intentions known.

Should TiVo entertain offers? If so, who would be the most logical buyer? Share your thoughts in the comment box below.