TiVo Inc will receive at least $250.4 million from Verizon Communications Inc as part of a patent litigation settlement, the video recorder pioneer said on Monday, sending its shares up more than 4 percent.
TiVo, whose brand is synonymous with digital video recorders, has had to turn to litigation to generate revenue from licensing fees as it struggles to fight competition from low-cost rivals.
Analysts said the Verizon settlement could bode well for a TiVo victory in cases against other companies, including Time Warner Cable Inc and Motorola Mobility, which is now owned by Google Inc.
The settlement, a big victory for TiVo, follows a similar deal it reached in January with AT&T Inc, which agreed to pay $215 million.
TiVo had also prevailed in a similar case against Dish Network Corp and EchoStar Corp in May 2011.
Regarding the ongoing cases, "Verizon has set a strong precedent for Motorola to settle," Brean Murray analyst Todd Mitchell said.
TiVo had sued Time Warner Cable in a lawsuit connected with the Motorola litigation, and Monday's settlement only improves the company's position, according to Lazard Capital Markets analyst Barton Crockett.
"It also potentially sets the stage for a similar settlement with Time Warner Cable over the next year or so," Crockett said.
Time Warner Cable declined to comment on Monday. Motorola Mobility was not immediately available for comment.
TiVo said Verizon would initially pay $100 million in cash and recurring quarterly payments totaling $150.4 million through July 2018.
As part of the deal, the companies are discussing having TiVo boxes carry the new Internet video streaming service Verizon is developing with Coinstar Inc's Redbox to take on Netflix Inc. TiVo's DVRs already feature video services provided by Netflix and Amazon.com Inc.
Besides the guaranteed compensation, Verizon will pay TiVo license fees on a monthly basis through July 2018 for each Verizon DVR subscriber above a certain agreed-upon number.
If Verizon and TiVo pursue "certain commercial initiatives" by December 21, up to $29.4 million of the payments made by Verizon would be subject to a credit of an equal amount, TiVo said.
This probably refers to a nonexclusive deal for Verizon to offer TiVo boxes to customers, according to Mitchell, the Brean Murray analyst. Verizon declined comment on the settlement or future agreements, and it referred questions to TiVo.
The companies also agreed to dismiss all pending litigation between them.
TiVo shares rose 4.2 percent to $9.96 in morning trading, while Verizon was down 0.3 percent at $45.52.
(Reporting by Neha Alawadhi in Bangalore and Sinead Carew and Liana Baker in New York; Editing by Joyjeet Das, Jeffrey Benkoe and Lisa Von Ahn)