Technicolor has been through several turbulent years of late, culminating in the shedding of old company name Thomson, and the divestment of broadcast technology company Grass Valley, transmitter products to Thomson Broadcast and encoding products to Thomson Networks. The remaining professional services, set-top box, router/modem and intellectual property rights and licensing (IP&L) business units have significantly streamlined the business, but in doing so Technicolor has racked up debt in excess of $1.3bn at the end of 2010, mostly to private equity firms.

The resulting business has become increasingly reliant on the IP&L business including licensing of technology patents and branding, generating only 12.5% of income, but virtually all profits. Within this portfolio, the major proponents are the MPEG-2 patents, administered by MPEG-LA and estimated to contribute around $225m in 2010. The remaining $225m is allocated to the licensing of the Thomson brand to CE firms, MP3 patents, physical media players patents and flat-panel TV patents. Leveraging this high-margin portfolio has generally been done via licensing however the sale of IPR is a fast way to generate cash at the expense of long-term recurring revenues.

Technicolor look set to benefit from a bubble in two markets, DRM and patents. Perceived value in the DRM market is being driven by the rapid rise of premium content delivery to multiple devices as part of pay TV multiscreen strategies and over-the-top premium content delivery. In the general patent market, demand for IPR in order to protect technology strategies and product portfolios has become a mainstay for news recently, with Google's $12.5bn purchase of Motorola Mobility, primarily for 17,000 patents to help defend Android, through to Apple's relentless pursuit of Samsung's Galaxy infringements. Between these two market drivers, it may be a good opportunity for Technicolor to capitalize on the ContentGuard stake.