Comments on Q....from the Gemstar Yahoo thread...
What do people think? What is the likelihood that Q will be more than a royalties on IP game? I thought the points made in bold below were pretty interesting. Stan
Stew
by: direwolf94 4637 of 4673
TV Guide's margins are not disasterous, they just reflect a lot of development spending and a different financial model from what you are normally drawn to. The mantra of John Malone is "Free Cash Flow" and that is how TV Guide has been run for the 5 years since it has been public. Spending on the IPG, spending on creating new cable networks out of carriage for Sneak Prevue, spending on litigation. That model has made investors 12 times their money in five years. You shouldn't be so quick to dismiss it. There is more than one way to skin a cat in creating shareholder value.
You like companies that have intellectual property. That is fine and it is a high margin business model. But, IMO, the upside is limited unless those companies can turn the intellectual property into an operating business. QCOM, for example, faces some serious risks as other operating companies squeeze them and offer similar products with better brands and more experience at the day-to-day warfare of market share (BTW, I like QCOM, but some smart people see these type of risks). MSFT really turned intellectual property into value by becoming an operating business. The company wouldn't have a $500 billion market cap today if it just licensed its technology. I'll say to you again that Henry would not have done this deal unless he agreed with these thoughts in general.
As for TVG, I know that the political sensitivities are very high on this inside TV Guide. I also know that the horse racing lobby is very strong and usually gets its way. Plus, they have a legitimate beef that the politicos have effectively ruined their business by promoting casino gambling. TVG is viewed by the horsemen as a way to save their industry. Don't underestimate the strength of their lobby or their arguments.
Finally, here is a prediction: Boylan will take a few businesses, including TVG, and spinoff a new company. KaStar will go as will a few other non-TV listings related businesses, like UVTV. That will create some real value for investors in the new GMST. Just a hunch but Malone did something similar with TCI Ventures and Liberty a few years back. Plus, it gives Boylan an excellent way to exit a job I'm sure he doesn't want on a long-term basis.
Direwolf |
