U.S. District Court Judge David Folsom just posted a definitional ruling in TiVo's infringement case against AT&T
And the ruling presumably sets the stage for a rich settlement, according to analysts. Ma Bell would rather settle early than wait for a potentially disastrous final ruling, according to analysts from Lazard Capital. Isn't that exactly how noted trolls Intellectual Ventures and Acacia Research make their daily bread?
Pause and reflect
Indeed, Lazard expects the AT&T settlement to result in a steady stream of licensing revenue on top of the lump-sum settlement check to cover damages. That's what happened when Dish Network
We can argue all day about the finer points, but there is one very distinct quality of TiVo's that sets it apart from the trolls. TiVo actually makes and sells things. Rambus and Intellectual Ventures don't.
This seemingly irrelevant fact actually makes a world of difference. Rambus can file lawsuits all day long without ever being sued back -- there are no products sales to block, no profits made from infringing on the rights of others.
But TiVo is open to all sorts of retaliation because the company makes and sells both hardware and software. So if TiVo launches a lawsuit, it had better be sure about its merits, because a bad attack can backfire with a vengeance. By contrast, Acacia and friends can simply roll the dice, shrug their shoulders at the occasional setback, and keep betting until they hit a big payday.
That essential quality also means that TiVo can't rest on its laurels, but must continue to innovate if it wants to stay alive. I see DVR as a huge yet impermanent footnote in entertainment history, and am not sure that TiVo will be able to make the transition into the fully digital era. However, today's ruling underscores the value I see in the stock right here, right now.
TiVo sits on $5.21 of cash per share. Janney Capital estimates that settlements with AT&T and Verizon
That's why I have a mid-term "outperform" rating on TiVo in our CAPS system, and not the long-term thumbs-up I'd usually prefer. Among the opportunities out there over the next year or so, TiVo seems like a decent option. Beyond that, the company will need to prove that it deserves our attention. It's all in the bits and bytes.
Will TiVo get its settlements or will the court battles drag on for another few years? Keeping a close eye on the news flow will help you stay informed. Just click here to add TiVo to your Foolish watchlist, and you're off to a great start.