Gemstar:
I sold Gemstar today; out at $54.
I decided to do this for the following reasons:
1. I think the fundamentals with respect to subscriber growth/eyeballs for IPG/EPG continue to improve. Nevertheless, I think the payday from these eyeballs is well off in the future. Still haven't heard from Gemstar or others what the Nielson data will be on page views and EPG use, the measurements, etc. In this area, the fundamentals are solid.
2. I think Gemstar is not a shareholder-friendly company, and this makes me uneasy, in an intangible way. Management is not visible; determinants for following Gemstar's market penetration are not easily measured and visible to Joe-average shareholder, like myself.
3. I think Henry is bright and dedicated, but a loner, and not a great communicator.
4. I think ebooks is interesting, but so early in the TALC as to be pre-chasm. The ebook venture is distracting, will suck up revenues, and will obscure the progress in and the revenues derived from ramping up EPG.
5. I wanted to initiate a cash position. Gemstar has been bucking the Naz here recently, so it's a good opportunity to generate some cash. For the next few months at least, I see the market and my portfolio as being in a trading range, with volatility. I envision using the cash on trying to pick out a timely low in Rambus.
6. Why Rambus????? Rambus DRAM is the only DRAM used in every Pentium IV PC, in most workstations, and in every Playstation 2. Rambus receives revenues from 40-50% of the rest of the DRAM market, ie SDRAM and DDR. The pending lawsuits may give the entire DRAM market to Rambus. For the next 2-3 years, Rambus may be entirely without any competition. In the worst case scenario, Rambus will enjoy royalties from most of the DRAMs sold for video games and PCs.
7. More on Rambus. RDRAM is clearly penetrating other market segments. In HDTV in Japan. In EMC's recently announced NAS hardware solution. Will be in networking equipment, based on agreements. I like Rambus management. They are clear, straightforward, visible, and their strategy is unchanging from CC to CC, qtr to qtr, since I've been following them in early 1999. I think they have a vision, a plan, and are methodically sticking to it.
By contrast, the ebooks thing with Gemstar may well be an early brilliant stroke with immense longterm benefits, but I don't like that it came out of left field, and just is not the reason I bought into the company. Overall, what's changed for me is the realization that there are questions about Gemstar's ability to execute the ebooks strategy, and management is a bit sketchy.
So, bottom line, I like Gemstar/Henry; I like Rambus/Rambus management even better. I think that both companies have immense potential. I think that following Rambus and following surrogates of Rambus success is more easily done, what with all the analysts and reports on DRAM sold, equipment by AMAT, etc. I think I can follow the progress with Rambus penetration better than I can follow the progress by Gemstar and its market penetration. If Rambus takes off before I buy in, then I'll use the cash during the volatility to reinforce my holdings in NTAP or JDSU.
My profits after a year and a half of investing in Gemstar are 30%. It's not much, but you know, it feels good to take a profit.
Apollo |
