TiVo Inc. (TIVO) Headed Toward a Profit

Litigation expenses regarding patents with several much larger technology companies will remain chunky for the foreseeable future (one to three years). Even with the company’s recent successes in court, management admits that the legal process from case to case remains very expensive and puts pressure on profitability. With continued success, TiVo Inc. (NASDAQ:TIVO) may very well be in a great position financially, but this is not yet a guarantee. The company will soon be facing Cisco Systems, Inc. (NASDAQ:CSCO), but has yet to begin discovery — a very, very costly process. Similar to its challenges against DISH Network Corp. (NASDAQ:DISH) and AT&T Inc. (NYSE:T), TiVo alleges that Cisco violated four company-owned patents that make possible the playback of time-shifted television. The suit was originally filed soon after Cisco sued TiVo Inc. (NASDAQ:TIVO) for not granting a broad enough product license to prevent suits such as these. Cisco lost that suit.

Given TiVo’s history of courtroom victories, anticipation of the cases may already be priced into the stock, as it currently trades at a rich level compared to its still-limited EBITDA.

Though TiVo Inc. (NASDAQ:TIVO) seems headed for a more stable business in the future and has certainly posted impressive gains in user numbers, the stock price does not offer enough downside protection for the potential negative outcomes in court. Investors may want to wait for a better entry point or for more clarity regarding the litigation.

The article TiVo Headed Toward a Profit originally appeared on Fool.com.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems (NASDAQ:CSCO).

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