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TiVo revenue slides, but profit soars on Dish case

Company says its quarterly performance underscores the importance of its patent portfolio over the long term.

TiVo's revenue slid considerably in the quarter that ended April 30 while its profits scored huge gains, thanks to a recent patent settlement.

According to the DVR maker, it generated revenue in its fiscal first quarter of $45.7 million, down from the $61.3 million it tallied during the same period in 2010. However, unlike the 2010 quarter when it lost $14.2 million, TiVo secured a profit during its last-reported period of more than $139 million.

TiVo's financial performance was bolstered by its recent settlement with Dish Network and EchoStar. The companies announced earlier this month that they had reached an agreement that will give TiVo more than $600 million, including a $300 million upfront payment. The remaining funds will be distributed to TiVo between 2012 and 2017. According to TiVo's financial statement, it secured over $175.7 million in "litigation proceeds" last quarter.

TiVo and EchoStar first locked horns in 2004 when TiVo claimed EchoStar, which was Dish Network's parent company until the satellite provider was spun off in 2007, violated the DVR maker's "multimedia time warping system patent." Over the next several years, the companies faced off in one court battle after another before TiVo secured a key ruling last month in the U.S. Court of Appeals, paving the way for the settlement.

"This has been a memorable quarter for TiVo," CEO Tom Rogers said in a statement yesterday accompanying TiVo's earnings. "The recent historic half-billion-dollar settlement with Dish Network highlights the significant value of our intellectual property and creates a recurring high margin licensing revenue stream that greatly enhances our financial profile."

Rogers added that the "licensing revenue stream associated with the settlement as well as the reduction in related litigation expenses will significantly enhance our adjusted earnings before interest, taxes, depreciation, and amortization profile in the current fiscal year and beyond, underscoring the immense value of our intellectual property."

TiVo's patent victory came at a fortuitous time for the company. Considering TiVo's revenue decline, it's becoming clearer than ever that the company will need to rely heavily upon its patent portfolio to maintain its financial standing. And that seems to be a reality the company is willing to acknowledge and embrace.

But its troubles go beyond revenue. On the subscription front, TiVo hasn't been performing all that well over the past year either. The company revealed in its quarterly statement that it now has over 1.9 million "cumulative subscriptions," down from the 2.5 million it had during the same period in 2010. The company said that 1.2 million of those are "TiVo-owned," while the remaining 753,000 subscriptions are derived from broadcasters and television providers, including DirecTV, Virgin Media, and Comcast.

Looking ahead, TiVo isn't expecting great news. The company expects to generate revenue of $46 million to $48 million in the current quarter and believes it will post a loss of $25 million to $27 million.