Dish Network Corp. (DISH), the second-largest U.S. satellite-television provider, rose the most since 2009 after settling all patent litigation with TiVo Inc. (TIVO), ending a seven-year legal dispute over video-recording technology.
Dish and EchoStar Corp. (SATS) agreed to pay TiVo $500 million, including an initial payment of $300 million, as part of an agreement to dismiss all pending litigation, the three companies said in a statement today. The settlement gives Dish and EchoStar rights to use certain TiVo patents for video recording.
“We are pleased to put this litigation behind us and move forward,” Dish Chief Executive Officer Charlie Ergen said in the statement. “Our agreement with TiVo provides us a competitive advantage as one of the few multichannel operators with rights to operate under TiVo’s Time Warp patent, which ultimately will allow us to enhance the performance” of the company’s digital video recorders.
TiVo, a pioneer in the market for home DVRs, had been trying to shut down Dish’s DVR service since winning cases before a jury four years ago and before an appeals court in 2008 and 2010. With the amount that Dish has already paid TiVo, it brings the total to more than $600 million, said CEO Tom Rogers.
“It resolves the uncertainty of whether we are going to get fees for our intellectual property,” Rogers said in an interview. “It establishes the precedent that our intellectual property is quite valuable.”
Dish rose $4.75, or 19 percent, to $29.79 at 9:46 a.m. New York time in Nasdaq Stock Market trading, its largest intraday gain since May 11, 2009. TiVo rose 73 cents, or 7.6 percent, to $10.30.
Adding Customers
TiVo first filed its patent-infringement lawsuit in 2004 against Englewood, Colorado-based Dish and EchoStar when they were a single satellite-TV and equipment company called EchoStar Communications Inc. The business split in two in 2008.
“The biggest surprise is in the settlement number itself, which is considerably lower than expected,” said Craig Moffett, an analyst for Sanford C. Bernstein & Co. in New York. “It removes a very significant overhang that has been clouding the picture at Dish for years.”
Dish also reported first-quarter profit that topped analysts’ estimates today. Net income reached $1.22 a share, the company said in a separate statement. Analysts projected 68 cents, the average of estimates compiled by Bloomberg.
Ergen, also the chairman of EchoStar, which makes set-top boxes for Dish, has bought assets including Blockbuster Inc.’s movie-rental business this year to reposition Dish against competitors such as DirecTV (DTV), the largest U.S. satellite-TV company. Dish gained about 58,000 users in the first quarter, after losing 156,000 customers in the fourth quarter.
Churn Fears
Analysts on average estimated a loss of 50,000 to 100,000 subscribers, according to Moffett, who has a “market perform” rating on the shares. The quarterly gain was a surprise, said Moffett, because Dish increased subscriber costs by $5 to all customers in February, the equivalent of a three-year price increase in one installment. Churn was 1.47 percent, lower than the 1.75 percent consensus forecast among analysts, according to Ryan Vineyard, an analyst at RBC Capital Markets in New York.
“There were fears churn would elevate, but that doesn’t seem to be the case,” said Moffett. “Reports of Dish’s demise were greatly exaggerated.”
Last month, Dish agreed to buy nearly all of Blockbuster’s assets for $320 million out of bankruptcy. In February, it agreed to acquire DBSD North America Inc., a provider of voice and data services over satellite, for $1.4 billion.
Blockbuster Plans
Dish announced today Michael Kelly will become president of Blockbuster. Kelly had been Dish’s executive vice president of commercial services. He joined Dish in 2000 after his company, Kelly Broadcasting Systems, which distributed international radio and TV programming in the U.S., was acquired by Ergen.
Kelly said he would “reinvigorate the iconic Blockbuster brand and allow consumers easier access” to movies and games available in Blockbuster stores, through the mail and online.
Dish net income rose to $549 million from $231 million. Sales climbed 5.5 percent to $3.22 billion, compared with the $3.23 billion average analyst estimate.
EchoStar, which reported net income of $17 million, or 19 cents, compared with $71.8 million, or 84 cents a year ago, agreed to buy Hughes Communications for about $1.32 billion in February, giving Dish the ability to offer broadband services. In January, EchoStar bought Move Networks Inc., which makes technology for streaming video online.
Dish and EchoStar Corp. (SATS) agreed to pay TiVo $500 million, including an initial payment of $300 million, as part of an agreement to dismiss all pending litigation, the three companies said in a statement today. The settlement gives Dish and EchoStar rights to use certain TiVo patents for video recording.
“We are pleased to put this litigation behind us and move forward,” Dish Chief Executive Officer Charlie Ergen said in the statement. “Our agreement with TiVo provides us a competitive advantage as one of the few multichannel operators with rights to operate under TiVo’s Time Warp patent, which ultimately will allow us to enhance the performance” of the company’s digital video recorders.
TiVo, a pioneer in the market for home DVRs, had been trying to shut down Dish’s DVR service since winning cases before a jury four years ago and before an appeals court in 2008 and 2010. With the amount that Dish has already paid TiVo, it brings the total to more than $600 million, said CEO Tom Rogers.
“It resolves the uncertainty of whether we are going to get fees for our intellectual property,” Rogers said in an interview. “It establishes the precedent that our intellectual property is quite valuable.”
Dish rose $4.75, or 19 percent, to $29.79 at 9:46 a.m. New York time in Nasdaq Stock Market trading, its largest intraday gain since May 11, 2009. TiVo rose 73 cents, or 7.6 percent, to $10.30.
Adding Customers
TiVo first filed its patent-infringement lawsuit in 2004 against Englewood, Colorado-based Dish and EchoStar when they were a single satellite-TV and equipment company called EchoStar Communications Inc. The business split in two in 2008.
“The biggest surprise is in the settlement number itself, which is considerably lower than expected,” said Craig Moffett, an analyst for Sanford C. Bernstein & Co. in New York. “It removes a very significant overhang that has been clouding the picture at Dish for years.”
Dish also reported first-quarter profit that topped analysts’ estimates today. Net income reached $1.22 a share, the company said in a separate statement. Analysts projected 68 cents, the average of estimates compiled by Bloomberg.
Ergen, also the chairman of EchoStar, which makes set-top boxes for Dish, has bought assets including Blockbuster Inc.’s movie-rental business this year to reposition Dish against competitors such as DirecTV (DTV), the largest U.S. satellite-TV company. Dish gained about 58,000 users in the first quarter, after losing 156,000 customers in the fourth quarter.
Churn Fears
Analysts on average estimated a loss of 50,000 to 100,000 subscribers, according to Moffett, who has a “market perform” rating on the shares. The quarterly gain was a surprise, said Moffett, because Dish increased subscriber costs by $5 to all customers in February, the equivalent of a three-year price increase in one installment. Churn was 1.47 percent, lower than the 1.75 percent consensus forecast among analysts, according to Ryan Vineyard, an analyst at RBC Capital Markets in New York.
“There were fears churn would elevate, but that doesn’t seem to be the case,” said Moffett. “Reports of Dish’s demise were greatly exaggerated.”
Last month, Dish agreed to buy nearly all of Blockbuster’s assets for $320 million out of bankruptcy. In February, it agreed to acquire DBSD North America Inc., a provider of voice and data services over satellite, for $1.4 billion.
Blockbuster Plans
Dish announced today Michael Kelly will become president of Blockbuster. Kelly had been Dish’s executive vice president of commercial services. He joined Dish in 2000 after his company, Kelly Broadcasting Systems, which distributed international radio and TV programming in the U.S., was acquired by Ergen.
Kelly said he would “reinvigorate the iconic Blockbuster brand and allow consumers easier access” to movies and games available in Blockbuster stores, through the mail and online.
Dish net income rose to $549 million from $231 million. Sales climbed 5.5 percent to $3.22 billion, compared with the $3.23 billion average analyst estimate.
EchoStar, which reported net income of $17 million, or 19 cents, compared with $71.8 million, or 84 cents a year ago, agreed to buy Hughes Communications for about $1.32 billion in February, giving Dish the ability to offer broadband services. In January, EchoStar bought Move Networks Inc., which makes technology for streaming video online.