Notes from two reports as reposted from Yahoo:
A few more bullet points from the Lehman Bros. report this morning. The report is a followup to a conference call held yesterday afternoon with Henry and Lehman institutional investors:
- Management indicated comfort with our 2q Rev and EPS estimates of $45.8 million and $0.17. Maintain 1-Buy and 12-month price target of $100, we think 2-year price target of $300 is very achievable.
- We believe that the the conclusion of the GI arbitration will happen in the next 10 days. GIC damages on analog boxes less relevant than digital portion, however Motorola may intercede to settle both.
- TV Guide has made public comments that a settlement was near at hand. Gemstar indicated that while progress was being made, no settlement has been reached. We envision an amicable settlement, by which Gemstar is the only guide, and TV Guide is allowed to private label. Our guess: revenue splits likely 60% Gemstar and 40% TV Guide (after 10% MSO split).
- As for AT&T's desire for a global settlement, management was unwilling to characterize any aspect of the case. Since anyone can walk away at any time, it can be construed that progress is being made. Our sources indicate that a settlementin the next 30-days possible and before xmas "highly probable".
- The Sony contract with Cablevision was termed "a positive" for Gemstar. Given Gemstar's relationship with Sony, any Sony set-top box that ships with an EPG is likely to include a Gemstar guide. This is a huge win for GMST because multi-year roll out of 3 million boxes.
More:
Comments this morning from Michael Graham, eNetwork analyst with Bancboston Robertson Stephens.
GEMSTAR IN MORE BOXES – The company may be reaching more people with its advertising-based guides faster than we had anticipated. We believe Gemstar's existing relationships with consumer electronic manufacturers will help extend the company's reach into new platforms. For example, although Gemstar had previously signed a deal with Sony to include the EPG in Sony televisions, Cablevision recently announced that it will purchase at least three million set-top boxes from Sony which we believe should include the Gemstar guide. This leverages the existing relationship with Sony and could equate to approximately $30 million in licensing fees for Gemstar. We believe Gemstar has cleared the hurdle of securing licensing arrangements with these large companies opening the door for Gemstar's EPG to find its way into almost any interactive TV platform. We believe electronic manufacturers have realized that Gemstar can enable them to add more features to their devices enabling them to raise average selling prices. Also, once one manufacturer starts putting the guide into their products, we believe that it creates competitive pressure for other manufacturers to do the same. Additionally, we believe General Instrument may feel pressure from Sony's entry into the set-top box business and therefore may be more willing to reach a deal with Gemstar. The issue may now be more urgent based on Motorola's intended purchase of GI. We continue to find the risk/reward profile of the stock compelling.
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