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I'm Selling TiVo When This Happens

Analyst firm MKM Partners just slapped an $18 price tag on TiVo (NASDAQ: TIVO  ) shares alongside a bu" rating. Upcoming trials against Google (NASDAQ: GOOGL  ) subsidiary Motorola Mobility this summer and Cisco Systems' (NASDAQ: CSCO  ) Scientific-Atlanta in 2014 could provide settlements in the range of $8 to $18 per share, with only $3 of that priced into TiVo's stock today.

If TiVo shares skyrocket to $18 and beyond, I'm selling my holdings immediately. I mean, stat. Strike while the iron is white-hot. Getting greedy for a larger gain doesn't make sense here.

You see, I love TiVo's technology and fully agree with MKM's opinion that the company deserves to win these patent infringement cases. Google and Cisco will have to pay up. These giants can afford even a multibillion-dollar settlement, and previous outcomes against cable, satellite, and telecom providers have set the stage for wins against these set-top box builders too.

But TiVo's DVR technology has had its 15 minutes of fame. Recording live broadcasts for later consumption in a digital format is a huge improvement over VHS tapes or DVD burners, but the next revolution is already at hand.

The TiVo Premiere 4. A pinnacle of achievement, or a relic of a soon-to-be-bygone era? Source: TiVo's press library.

TiVo says that its platform is "TV, only 1,000 times better." If so, we've already got something a million times better than regular TV.

Why bother recording stuff when you can just dip into an established pool of content, whenever and wherever you want it? That's what Netflix (NASDAQ: NFLX  ) offers to 30 million American subscribers today, with a handful of hungry rivals nipping at its heels. Even the cable guys have an equivalent solution, namely their video-on-demand services. So far, that option has largely been appreciated for its pay-per-view muscle. One day, company leaders will realize that buffet-style subscriptions in the Netflix mold have far more appeal for your average couch potato.

The inevitable video-on-demand shift plus the relentless Netflix assault will undermine traditional broadcast models until that fancy TiVo box is pushed aside -- doomed to gather dust next to your old VCR, DVD player, and yes, Blu-ray player, too. All of these are mere stopgaps on the way to a far more convenient future.

TiVo still has a chance to change my mind, if the company can take lessons learned from the DVR days and apply them (alongside the coming cash infusions) toward a next-generation platform to rival Netflix. I haven't seen this happening yet, but you never know.

Until then, I've penciled in a "sell" event on TiVo when the Motorola and/or Scientific-Atlanta windfalls drop in. That currently looks like the end of TiVo's footnote in broadcast history. You gotta know when to hold 'em, know when to fold 'em, and know when to walk away.

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