Mike, your questions deserve thoughtful discussion....it took me a day or two to sort out my thoughts, but let me try to explain my reactions to the Henry and Elsie story.
1. First, I always buy stocks (and eventually sell) based on a due dilligence of financials, industry outlook, relative market position, etc. In the case of Gemstar I made my first, and subsequent buying decisions...and postponed my selling decisions, because the financials I was being presented with seemed to indicate the franchise was much healthier than it really was. Management (Henry and Elsie) misled me, pure and simple. The accountants may have been a part of it, but that does not ease my financial pain at this point.
2. As an owner of Gemstar I often thought that Henry's "patent terrorist" persona was not the right way to handle the patent portfolio....which is all the company really had going. He seemed remarkably able to alienate everyone in his industry. Confrontation rather than negotiation. This included long time partners like Thomson. I never quite understood why he had to be master of the universe instead of simply a king with a long term committed revenue stream. Now, you may say if I felt this way I should have sold the stock. Maybe I should have, but the darn financials I saw seemed to indicate enough cash flow and bottom line earnings to make it worth the bet. I remember thinking "ink the deal, Henry. Get comcast and cox in line with ATT....satisfy Murdoch and Malone that you are not irrational on building the franchise". Yes, if I felt that way, I should have sold, but I thought all this cash (not barter) was pouring in. I was willing to take the chance.
3. Rolling the dice on the patent portfolio, all or nothing, with SFA....I don't know. I always would prefer a settlement with an assured revenue stream. Henry took something I owned (a patent right) and through his slash and burn litigation strategy degraded it greatly. Ego, or good business practice? Again, I didn't know how strong the patent portfolio was...I relied on Henry that it was great, and that our legal strategy (only claiming infringement of certain key patents) was the way to go. Courts don't like non-free trade types....fact of life. You better have it all in place before rolling the dice on your only key asset. Obviously, Henry had far less leverage than he thought. This kind of egocentric thinking ticks me off. He works for me, after all. Where are my interests?
4. So, Malone and Murdoch push Henry and Elsie out and they get the big payoff, out of my future revenue stream. Yeah, I don't like that. If they did commit fraud....or just ran things poorly....should they be rewarded in any way?
All in all, GMST has been one of my worst relative experiences. I have had other stocks drop in value, but this one is so tainted with the financial and marketing decisions of Henry that a potentially great franchise has been greatly hampered. The moves of current management have been good starts to righting the ship, but in wonderful hindsight I have to say that Henry did noone any favors....nor was he honest with any of us as to the real state of financial or legal affairs. And that is all we had to base our decisions on.
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