Market Overview

Does Apple Still Want to Buy TiVO?

The Mac maker was once rumored to be interested in a TiVo takeover. But with rumors of a buyout heating up, it isn't Apple's name that continues to come up.

Rather, it is Apple's chief rival, Microsoft (NASDAQ: MSFT), that is making waves this week with what could be a top-secret plan to take control of the nation's largest manufacturer of DVRs (digital video recorders).

"Cisco (NASDAQ: CSCO), Microsoft most likely to take over TiVo (NASDAQ: TIVO)," an analyst told Benzinga this week. The analyst declined to be named because he was not authorized to speak publicly on the matter. "Very likely to happen."

"Cisco would not buy them because they just bought NDS," another analyst told Benzinga. This analyst also declined to be named because he was not authorized to speak publicly on the matter. "Rovi (NASDAQ: ROVI) [is the] most likely purchaser."

Albert Fried & Co. analyst Rich Tullo agrees with that last assessment, telling Benzinga that Microsoft or Rovi are the firms most likely to acquire the DVR maker. "We believe it is likely that the TiVo will be bought out within 24 months, but not before the resolution of the Verizon Wireless (NYSE: VZ) settlement," Tullo told Benzinga. He added that Microsoft would be attractive because it would give the Windows maker more merchandise to sell in its upcoming stores. Further, the technology could be added to the Xbox 360 game console, which is rumored to receive a minor upgrade in the next 12 to 18 months, followed by a more substantial hardware release in 2014.

Rumors of a TiVo buyout go back as far as 2005. At that time, Apple (NASDAQ: AAPL) was thought to be interested in acquiring the DVR maker. The Mac Observer reported on the matter, quoting an analyst (Steven Kroll Jr. of Monness, Crespi, Hardt & Co.) who told Reuters, "What we hear on the street is that Apple is interested in their business and that they are a [takeover] target."

Seven years later, TiVo remains on the market.

More Hyperbole?

Nearly every publicly traded corporation has, at one time or other, found itself on the takeover rumor list. But the TiVo situation is somewhat unique. If the rumors are accurate, only the biggest and best corporations have expressed interest in this acquisition.

In July 2011, Businessweek reported that TiVo looked "like a takeover target," pointing to Microsoft or Google (NASDAQ: GOOG) as the most likely buyers. Businessweek even quoted an analyst, Maxim Group's Mark Harding, who said that the company could earn $2.4 billion ($20 a share) on the sale, which was nearly double TiVo's July 5 closing price of $11.

Nine months and several fluctuations later -- including a drop to $7.19 on August 10, 2011 -- and the stock is back at $11. While TiVo's patented technology proved to be a powerful foe in the battle against Dish Network (NASDAQ: DISH), enabling the DVR leader to collect a hefty paycheck, that may not be enough to warrant a high takeover price.

The patent payments could keep coming, however. Earlier this year, TiVo received more than $200 million from AT&T (NYSE: T).

Google's Sneaky Strategy

The world may never stop speculating about the reasons why Google decided to purchase Motorola (NYSE: MMI). Critics and supporters alike go back to the patent argument, insisting that Google was willing to do whatever it took to win any and all legal battles. More significantly, by strengthening its patent defense, Google has simultaneously strengthened its patent offense, which could one day allow the company to acquire billions of dollars in additional revenue from its competitors.

If Google only wanted Motorola for its patents, then there is no way that the company would ever acquire TiVo unless it plans to turn it into an open-source platform for TV and cable box manufacturers. Similarly, if Google wanted more than patents, then it got what it paid for -- Motorola came pre-packaged with plenty of manufacturing options, including cable boxes.

Adding TiVo to the mix could be a tantalizing addition that could sway hardware sales in the company's favor. But that's a big "could."

Apple Entertainment

Based on everything we know about what Apple currently manufactures and plans to manufacture in the future, it seems that the company has everything it needs. It could certainly benefit from the technology that TiVo has to offer, especially if the company believes that it could help sell a television -- or the next version of the Apple TV set-top box.

Aside from that, however, TiVo does not seem to fit into Apple's current strategy. Then again, TiVo didn't seem to fit into the company's strategy seven years ago either.

Xbox Marks the Spot

In 2011, Microsoft poured billions of dollars into its acquisition of Skype. Why? We don't know yet. The company seemed to have a reason -- many of which I outlined last year -- but it could be years before Microsoft earns a dime on the purchase.

TiVo would be a lot cheaper and likely lead to profits much sooner. Not because TiVo is such a hot commodity (it's not), but because the technology is somewhat desirable and could be used to bolster the next Xbox as the ultimate entertainment device. As it stands, the current Xbox can do almost everything consumers want. It is, in essence, the ultimate set-top box. But its roots are in video games, which helped it stand out. Adding TiVo could make the next Xbox even more attractive.

Follow me @LouisBedigian

Posted-In: Cisco Mark Harding Maxim GroupNews Rumors M&A Success Stories Tech

 

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