TiVo 2013 Annual Report Download - page 16

Table of Contents
During the fiscal years ended January 31, 2014, 2013, and 2012, our net income (losses) were $271.8 million, $(5.3) million, and $102.2
million, respectively. As of January 31, 2014, we had an accumulated deficit of $(410.5) million. The size of future net losses or income will
be impacted by a number of factors, including the timing of the development or deployment of solutions under our television service provider
arrangements, the growth or decline in the number of TiVo subscriptions, the prices at which we sell TiVo set-top boxes, the amount of
research and development expenses we incur to fund new product development and expand our engineering services capacity, and the
amount and timing of settlement payments. In fiscal year 2012, we entered into patent settlement agreements with DISH and AT&T and in
fiscal year 2013, we entered into a patent settlement agreement with Verizon. In fiscal year 2014, we entered into a patent settlement
agreement with Motorola/Cisco. The patent settlement agreements with DISH, AT&T, Verizon, and Motorola/Cisco will generate recurring
revenues for us until 2024, with the majority of these revenues received by 2019. We generate a significant amount of revenues as a result
from these settlement agreements. If we are unable to renew or replace these revenues through similar or other business arrangements, our
revenues would decline and our business would be harmed as a result. Unless and until we generate significant additional revenues from
our operations or substantially reduce our expenses, we may likely continue to incur losses in future fiscal years after we cease further
receipt of our current legal settlement payments and we may never achieve sustained profitability. As such, in the future, continued net
losses and negative cash flow could drain our existing cash balance.
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From time to time, we are sued in court or receive letters from third-parties alleging that we are infringing on their intellectual property,
including our current pending intellectual property litigation with Digital CBT. Regardless of their merit, we are forced to devote time and
resources to respond to these lawsuits and letters. In addition, if any of these third-parties or others were to be successful in suing us, our
business would be harmed because intellectual property litigation may:
•be time-consuming and expensive;
•divert management's attention and resources away from our business;
•cause delays in product delivery and new service introduction;
•cause the cancellation of current or future products or services;
•require us to pay significant amounts in damages, royalties and/or licensing fees;
•cause us to incur material expenses as a result of our indemnification obligations; and
•result in an injunction that could force us to limit the functionality of our products and services, stop importing our products
and services into certain markets, or cease operating our business altogether.
The emerging advanced-television industry is highly litigious. Additionally, many patents covering interactive television technologies
have been granted but have not been commercialized. A number of companies in the advanced-television industry earn substantial profits
from technology licensing, and the introduction of new technologies by us is likely to provoke lawsuits from such companies. A successful
claim of infringement against us, our inability to obtain an acceptable license from the holder of the patent or other right, or our inability to
design around an asserted patent or other right could cause our manufacturers to cease manufacturing DVRs that enable the TiVo service,
our retailers to stop selling the product or us to cease providing our service, or all of the above, which would eliminate our ability to generate
revenues.
Under our agreements with many of our manufacturing and licensing partners, we may be required to indemnify them in the
event that our technology infringes upon the intellectual property rights of third-parties. Due to indemnity obligations which include
infringement of third-party intellectual property rights and may also include indemnification for open source software violations, we could be
forced to incur material expenses if our manufacturing and licensing partners are sued. In addition, because the products sold by our
manufacturing and licensing partners often involve the use of other persons' technology, this increases our exposure to litigation in
circumstances where there is a claim of infringement asserted against the product in question, even if the claim does not pertain to our
technology.
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