Rovi Corp., which licenses data for television guides, dropped the most in three years after a judge ruled in favor of Netflix Inc. in a patent lawsuit.
U.S. District Court judge Phyllis J. Hamilton issued a ruling Wednesday granting Netflix’s motion for summary judgment on five of Rovi’s patents, finding them invalid, the company said in a statement Thursday. The patents in question were related to features and functionality provided for over-the-top video service, which has been utilized by companies including Apple Inc., Google Inc. and Hulu LLC, according to the statement.
Shares of Rovi slid 20 percent to $14 at 4 p.m. in New York, the worst drop since July 2012. The stock has plunged 44 percent since the end of February. The stock traded close to $70 in 2011, declining after acquisitions and efforts to develop new products absorbed lucrative licensing cash flows and failed to deliver growth.
Rovi, formed through the 2008 merger of Macrovision and Gemstar, holds the patents for TV programming guides and products that are licensed to cable companies and others.
“The Netflix case is over (for now) and, as expected, all five Rovi patents were invalidated,” Michael Olson, managing director and senior research analyst at Piper Jaffray Cos., wrote in a note Thursday.
Olson, who has an overweight rating on Rovi’s shares with a $29 target price, said a potential patent license revenue stream from Netflix was “relatively unlikely and has never been part of our estimates.”
The ruling shouldn’t affect Rovi’s license renewals with Charter Communications Inc., Comcast Corp., and Dish Network Corp., which were all completed earlier this year, Olson wrote in the note. Rovi’s upcoming renewal with Time Warner Cable Inc. in September should fall into the existing Charter deal as Charter acquires Time Warner Cable, he wrote.