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Technology Stocks : Gemstar Intl (GMST)
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To: NY Stew who wrote (591)10/8/1999 10:09:00 AM
From: Moray  Read Replies (2) of 6516
 
From analyst Keith Benjamin:

Gemstar announced plans to buy TV Guide (TVGIA-$47). Although we believe the acquisition came as a surprise to a number of investors, we like the deal. We believe the combination takes much of the execution risk out of the Gemstar's stock while forgoing only a marginal bit of short-term upside. We believe the merger should lead to quicker penetration of the Gemstar's EPG across all platforms, as the deal aligns Gemstar's strength in the consumer electronics market with TV Guide's strength in the cable set-top market. As Gemstar's EPG gains critical mass, we believe the future advertising revenue stream will accelerate substantially, with the combined entity leveraging TV Guide's large sales force and well known brand. Also this week, Gemstar was awarded a penalty of $26 million to $35 million in a partial arbitration ruling against General Instrument for past unpaid licensing fees. In the future, we expect Gemstar will receive ongoing fees related to additional GIC set top box sales. This award relates to GIC's illegal use of Gemstar's EPG in analog boxes. The second phase of arbitration will focus on digital boxes and is expected to begin in the next three months. We believe this week's news removes two of the largest concerns from Gemstar's stock and helps to clear the path for open-ended growth. We believe Gemstar's EPG business can rapidly grow to an installed base of 30 million households within a couple years. We believe this would be worth approximately $50 billion in market capitalization, providing upside to Gemstar stock.
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