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Technology Stocks : Gemstar Intl (GMST)
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To: scott who started this subject3/2/2004 8:22:12 PM
From: Mike Buckley  Read Replies (1) of 6516
 
I haven't listened to the conference call, so take that lack of context into account if you decide to pay any attention to this rant about info provided by the press release.

The 2003 operating loss was $625 million including the $417 impairment charge. It also includes $75 million in legal costs of which $68 million is the settlement of the investor class action suit.

The company forecasts an operating profit in 2004 of $44 million to $69 million. That includes $502 million in one-time, pre-tax payments from Comcast, Pioneer and Echostar. Not good.

The company's free cash flow continues to get worse and worse. I've been recording information about that since 1998. During that time, 2003 is the first year the company generated negative free cash flow. Worse, there is a strong trend in free cash flow as follows beginning in calendar year 2000: $229 million, $146 million, $95 million and negative $11 million. (Those numbers exclude the tax benefit related to stock options of which there was none in 2003.) And in five of the last 6 quarters, no meaningful free cash flow was generated. Not good.

Free cash flow will certainly turn positive in 2003 thanks to the $502 million in one-time payments. But they are one-time and the company is running out of prospective customers to generate such large one-time payments.

--Mike Buckley
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