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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: mmbw who wrote (50018)	1/24/2002 10:44:18 AM
From: Mike Buckley	Read Replies (2) of 54805

mmbw, I believe Gemstar's decline in the stock price reflects at least one analyst's concern about ongoing ITC litigation. If you go to the Gemstar thread, you'll see that the analyst believes opposing parties have a stronger case than previously believed. This follows a loss for Gemstar in December when the FCC ruled that Time Warner Cable is not required to transmit Gemstar's embedded program guide. For the first time in the many years I've been following Gemstar, these developments are the first evidence that there might be chinks in Gemstar's legal armor upon which Gemstar strongly depends. A second issue is that one of Gemstar's strongest partners, Thomson, has cancelled a contract pertaining to business in Europe. Gemstar is suing Thomson about it. That's not the sort of relationship that lends to a strong value chain. Though I don't pretend to understand all the intracies of the planned purchase of DirectTV by Echostar, it would have been an easier path for adoption of Gemstar's product if Murdoch had been the winning bidder. I also wonder if the recent concern about accounting (the nervousness related to the Enron debacle and the negative attention being given to pro forma numbers by the media) has a role in the very recent decline in the stock price. You're proably aware that Gemstar has been emphasizing EBITDA since it bought TV Guide. Anything other than straightforward reporting of the bottom line is probably being looked at with more skepticism lately than in the past. I believe that pretty much covers the negative news in the last three months that might partly explain the decline in the price of the stock. There has been some good news but the market has clearly been paying attention to the negative news. --Mike Buckley

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