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Rovi (ROVI) Jumps on Google (GOOG) Deal

Stocks in this article: GOOGROVI

NEW YORK (TheStreet) -- Rovi Corporation (ROVI) jumped on news it has signed a multi-year patent license deal with Google (GOOG). Rovi, a digital entertainment specialist, said the deal will cover Google's use of patented video discovery technologies. Terms of the licensing deal has not been disclosed.

"Rovi is continuing to expand its technology and patent portfolio to improve the discovery of entertainment in all different types of environments," said Samir Armaly, executive vice president, Worldwide Intellectual Property and Licensing at Rovi, in a statement.

"We are happy to work together with Google to move forward and support technology advancements that further consumers' ability to find and enjoy content on the device of their choice."

By midday, Rovi shares had jumped 3.9% to $21.91, while Google was up 0.29% to $1,142.20.

TheStreet Ratings team rates Rovi Corp as a Sell with a ratings score of D+. The team has this to say about their recommendation:

"We rate ROVI CORP (ROVI) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has decreased to $28.83 million or 39.61% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, ROVI CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • ROVI, with its decline in revenue, underperformed when compared the industry average of 5.5%. Since the same quarter one year prior, revenues fell by 12.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • ROVI's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.86 is very high and demonstrates very strong liquidity.
  • The net income growth from the same quarter one year ago has exceeded that of the Software industry average, but is less than that of the S&P 500. The net income increased by 13.9% when compared to the same quarter one year prior, going from -$13.33 million to -$11.47 million.

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