What happened?
Entertainment information services provider Rovi (NASDAQ: ROVI) has re-signed one of its big clients. The company announced Monday that it renewed its deal with Sony (SNE +2.77%), under which the Japan-based conglomerate will use Rovi's data for its consumer electronics devices throughout the world. Rovi described the renewal as "multi-year." It did not elaborate in its press release, nor did it reveal what Sony is to pay for the new arrangement.
The news comes several days after Rovi announced it had also inked a renewal with telecom giant AT&T (T +1.93%). In that case, Rovi did specify the term of the agreement -- seven years. But like the Sony renewal, financial details were not disclosed.
Does it matter?
Coming so close on the heels of the AT&T signing, the Sony deal should help support Rovi's assertions that demand continues to be strong for its offerings. It seems that some investors are buying this argument. After the AT&T news broke, the company's shares popped higher -- from languishing around the $11 level, they climbed to an eventual $18 and change before settling back down. Rovi stock also popped on the Sony news.
But they had been hammered before then, and for good reason. This past summer, the company lost big in a patent battle against Netflix (NFLX +3.91%), the result of which was that five of its content management patents were invalidated by a California court. As Rovi's business lies on a foundation of patents (the company has over 5,000 of them), this obviously puts its business model at risk. The renewals are good news, indicating that collapse probably won't happen anytime soon. But in light of those recent, worrying legal developments, Rovi just doesn't feel like a solid investment to me despite those apparently encouraging renewals.
