Brean Capital Defends Rovi Corp Against Activist Charges

In a report published Monday, Brean Capital analyst Todd Mitchell maintained a Buy rating on

, with a price target of $31. The company's share price has recently been under pressure due to multiple reasons. "Recent legal rulings have set precedent for investors to question the veracity of its IP portfolio, while activist investors are challenging the capability of its current leadership to generate shareholder value," Mitchell said. The analyst believes that the concerns related to Rovi's IP position are overdone. "We also find little merit in the charges of the activist shareholders. We believe Rovi's IP position for service provider applications is deeper and component patents therefore less abstract than it is for over-the-top (OTT) applications," Mitchell explained. Rovi is engaged in product development with the service providers with which it is negotiating IP licensing renewals. This has increased the likelihood of "resolution without litigation." In the report Brean Capital noted, "…we see activist charges as dated, relating primarily to the missteps of Rovi's prior management team, which its board saw fit to replace. We believe the current management team has spent the past three years correcting the mistakes of their predecessors, strengthened Rovi's IP position for pending renewals, and executed on a product development strategy that capitalizes on Rovi's market position and technology base." Although there is uncertainty surrounding whether Rovi would prevail in the Netflix case, it would not be appropriate to use that case "as a proxy for Rovi's service provider renewals as Rovi's IP position related to the service profile and distribution infrastructure of the service providers is much deeper and well established," the report added.