Can TiVo Make Money After Settling With Google and Cisco Systems?

TiVo (TIVO) will release its quarterly report on Tuesday, and investors have been increasingly optimistic about the digital-video-recorder technology company's future prospects. Having won its latest settlements to resolve litigation against Google (GOOGL 1.60%) and Cisco Systems (CSCO 0.69%), TiVo faces the daunting task of figure out how to make money from its ongoing operating business rather than relying on a series of litigation efforts to reap big cash awards.

TiVo was a pioneer in the DVR world, and its legal victories against Google and Cisco stemmed in part from their alleged failure to give TiVo as much credit as it was due from its role in creating DVR-enabling technology. But now that the big-money settlements have come in, the big question is whether licensing revenue from its arrangements with various other companies will bring in enough revenue for TiVo to stay profitable. How will TiVo grow from here? Let's take an early look at what's been happening with TiVo over the past quarter and what we're likely to see in its report.

Stats on TiVo

Source: Yahoo! Finance.

How much can TiVo profit this quarter?
Analysts have gotten a lot more optimistic about TiVo earnings in recent months, reversing early calls for a loss in the October quarter and having raised their projections for next fiscal year by almost $0.30 per share. The stock has also done well, rising 21% since late August.

The big push in TiVo earnings lately has come from huge settlements with Cisco Systems and Google. In June, the two companies settled claims that they had illegally infringed on TiVo's patents for its digital video recorder technology. By making upfront payments of $490 million under the settlements, Google and Cisco were singlehandedly responsible for giving TiVo's the biggest profit in its history.

What's important to realize, though, is that TiVo will keep getting money from the tech giants well into the future. In its second-quarter earnings report, TiVo released details on how it will keep receiving settlement money through 2019, with Google and Cisco responsible for most of the future income.

Now looking forward, TiVo is trying to come out with new products. Its Roamio Plus allows simultaneous recording of six shows, with the ability to access that content via mobile devices even when they're not at home. At $400, though, the device is definitely for high-end users, especially when you tack on an extra $15 per month subscription charge. Moreover, with streaming giant Netflix (NFLX 1.87%) working hard to make itself more accessible both remotely and in homes via potential arrangements with cable companies, TiVo might not gain a long-lasting competitive advantage from the device.

In the TiVo earnings report, watch to see how the company's first post-settlement quarter fares. With so much at stake, investors need to see proof that TiVo can move on from the courtroom and find ways to make money from its core business.

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