Rovi Corp. (ROVI), a provider of digital entertainment guides, tumbled the most since its initial public offering in 1997 after cutting its annual sales forecast amid delays in adding new patent licensees.
Rovi sank 43 percent to $10.01 at the close in New York, for the biggest drop since its IPO. Through yesterday the shares had fallen 28 percent this year.
Rovi cited delays in adding new licensees in key growth areas including consumer electronics manufacturers and the TV Everywhere field of use in the U.S. The company sued three television makers in May, claiming infringement of patents for its technology and parental-control chips that block television content.
“In order to ensure the long-term protection of our key intellectual property, we did not sign certain new patent licensing agreements during the second quarter, as some expected licensees would not agree to acceptable terms,” Tom Carson, chief executive officer of the Santa Clara, California-based company, said in a statement yesterday. “In addition, certain other deals with first time licensees are simply taking longer to close than anticipated.”
The company projected full-year revenue excluding certain items of as much as $680 million, according to the statement. That compares with a prior forecast of a maximum of $785 million.
Rovi expects to report a loss from continuing operations in the second quarter of as much as 18 cents a share, compared with a loss of 6 cents a share a year earlier.
Earnings excluding certain items were probably as much as 38 cents a share during the period. That compared to an average analyst estimate of 57 cents, according to data compiled by Bloomberg.
Second-quarter sales probably fell 12 percent to $158 million, the company said. Analysts had estimated $182.4 million.
“The challenges and increasing volatility facing this company extend too deeply into the core business for us to recommend the stock,” Michael Olson, an analyst with Piper Jaffray Cos., wrote in an investor note today.
Of particular concern is the “challenge Rovi appears to be facing in getting paid for patent licensing from CE manufacturers and service providers, which will likely result in increasing litigation,” wrote Olson, who downgraded the shares to neutral from overweight and cut his price target to $15 from $35.
Last month, Rovi argued that Mitsubishi Electric Corp. (6503), LG Electronics Inc. (066570) and Vizio Inc. misappropriated its on-screen guides that allow users to browse channel listing and upcoming shows, according to a complaint filed in federal court in Wilmington, Delaware.
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