Rovi (ROVI) Jumps on Google (GOOG) Deal

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.

TheStreet Ratings team rates GOOGLE INC as a Buy with a ratings score of A. The team has this to say about their recommendation:

"We rate GOOGLE INC (GOOG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and compelling growth in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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

  • GOOG's revenue growth has slightly outpaced the industry average of 9.2%. Since the same quarter one year prior, revenues rose by 11.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although GOOG's debt-to-equity ratio of 0.06 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 4.50, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 34.41% and other important driving factors, this stock has surged by 53.90% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GOOG should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • GOOGLE INC has improved earnings per share by 34.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GOOGLE INC increased its bottom line by earning $32.47 versus $29.74 in the prior year. This year, the market expects an improvement in earnings ($44.08 versus $32.47).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Internet Software & Services industry average. The net income increased by 36.5% when compared to the same quarter one year prior, rising from $2,176.00 million to $2,970.00 million.

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