TiVo Inc.(NASDAQ:TIVO), which sells set-top boxes, has
been upgraded by JP Morgan securities to `Overweight' rom `Neutral' on strong
subscriber growth and expectations of a favourable ruling in its patents
dispute with Verizon Communications.
The upgrade sent TiVo's shares up more than 5 percent
to $9.5.The stock has risen 6.4 percent so far in 2012.
The company, which also licenses its digital video
recording technology to cable operators, had reported second quarter results
that surpassed analyst expectations.
While the sales of its video recorders soared, it also
saw a 41 percent rise in subscriptions across the world, led by growth at
Virgin Media.
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JP Morgan analyst Paul Coster wrote in a note: The
company is adding customers like cable operators Com Hem in Scandinavia and GCI
in Alaska, and is poised for higher adoption for its technology at ONO in
Spain, Charter and ComCast Corp.
TiVo's advanced TV solutions, which integrate
broadcast programming, video on demand and internet video with interactive ad
content, appeal to smaller cable operators that need to defend against
encroachment by new home entertainment rivals like Google and Apple Inc, Coster
said.
TiVo, which owns hundreds of patents, earns a
substantial portion of its revenue from suing other companies over patent
infringements and winning them.
It had earlier this year reached a patent-related
settlement with Verizon's rival AT&T Inc under which the mobile service
provider agreed to pay TiVo a minimum of $215 million and monthly licensing
fees.
A trial with Verizon is scheduled to begin on Oct. 1.
"We believe a Verizon settlement in excess of
$200 million is possible but if this case goes to trial potential outcomes
range from zero through multiples of $200 million," he said.
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