here is what value line said about gemstar recently.
gemstar is acquiring tv guide. under terms of the $8.2 billion deal, gemstar will issue .6753 shares of stock for each tv guide share, and assume about $600 million in debt. the transaction is slated to close during the second half of 2000, pending shareholder and regulatory approval. the new entity would have a commanding presence in the burgeoning electronic program guide market. in fact, were it not for the rapidly evolving electronic landscape (discussed below), regulatory concerns would probably be difficult to overcome.
expectations for the electronic program guide market have high. the current investor perception is that the guides will become portals in the forthcoming interactive television age, generating large sums of advertising revenues. advanced guides are becoming available as cable and satellite companies deploy next-generation set-top boxes. interactive features will probably not be mainstream for several years, however, until these providers upgrade their networks. patented gemstar technology has been incorporated into a wide variety of platforms, and is capable of being delivered over satellites, the internet and traditional airwaves.
but the battle over the interactive landscape is intensifying. sony's itv, which provides on-screen information at the click of a button is already on the market. perhaps a larger threat is a potential convergence between television and the internet. indeed, internet access via set-top boxes is already available in select markets, and were this to become widespread, barriers to entry in gemstar's market would be significantly lowered.
gemstar management has done an admirable job of positioning its electronic programing product. it has thus far defended its intellectual property, struck deals with a multitude of consumer electronics and media industry players, and has forged joint ventures in germany and japan. the deal with tv guide provides a powerful brand name, additional market penetration, and alliances with at&t and news corporation. the stock is timely for the year ahead, but long-term investors with a tolerance for risk might want to wait for a stock price pull-back before making commitments.
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