Yesterday's announcement that Macrovision is buying Gemstar was not well received on Wall Street:
Gemstar shares fell 99 cents, or 16.6 percent, to finish at $4.99 Friday, while Macrovision shares plunged $5.55, or 21.4 percent, to $20.44, both on the Nasdaq exchange. That downturn reduced the value of Macrovision's stock offer to $5.21 per share.
Sale could be end of TV Guide
Money loser called soon to be obsolete
Associated Press
December 8, 2007
SAN FRANCISCO - TV Guide magazine's already fuzzy future looks even more uncertain now that the magazine is part of a proposed $2.8 billion sale to security software specialist Macrovision Corp.
Gemstar-TV Guide International Inc.'s intellectual property and interactive programming were the magnets for Macrovision's proposal Friday to buy Gemstar -- raising questions about whether there will be a place for a 54-year-old magazine that has been losing money and readers.
Macrovision Chief Executive Fred Amoroso didn't provide any definitive answers in a conference call with analysts, saying he didn't know much about publishing and needed more time to assess how TV Guide could fit into his strategy.
But some industry observers think the one-time household staple will soon land in the trash bin of publications that couldn't adapt to the digital age.
"It will very quickly become obsolete because of its lack of reinvention," predicted Melissa Pordy, director of media investment solutions in North America for advertising agency Cheil Worldwide. "They just didn't keep up with the change in technology."
Regardless of the magazine's fate, Wall Street didn't see the logic in Macrovision's decision to buy Los Angeles-based Gemstar.
"It's a terrible deal," said Kaufman Brothers analyst Todd Mitchell. "It smells like a desperation move. Macrovision seems to want only certain assets and doesn't know what to do with the others."
Santa Clara, Calif.-based Macrovision believes it can blend its anti-piracy tools for digital video, music and video games with Gemstar's interactive program guides to make it easier for consumers to gain secure access to entertainment on a wide variety of electronic devices.
With $200 million in annual revenue and about 760 employees, Macrovision will be trying to digest a larger company unless it jettisons TV Guide. Gemstar has about 1,600 workers and generated $571 million in revenue last year.
Macrovision plans to buy Gemstar with a mix of cash and stock. The cash option is worth $6.35 per share, just 6 percent above Gemstar's stock price before the deal was announced. The stock alternative worked out to $6.62 per share, or 11 percent above Gemstar's market value before the terms were revealed.
Gemstar shares fell 99 cents, or 16.6 percent, to finish at $4.99 Friday, while Macrovision shares plunged $5.55, or 21.4 percent, to $20.44, both on the Nasdaq exchange. That downturn reduced the value of Macrovision's stock offer to $5.21 per share.
Despite the negative reaction, the deal has the support of Gemstar's biggest shareholder, News Corp., which owns 41 percent of its shares. The proposed sale, expected to close in the second quarter next year, requires approval from two-thirds of Gemstar stockholders.
New York-based News Corp., run by media baron Rupert Murdoch, acquired TV Guide magazine from Triangle Publications in 1988 in a $3.2 billion deal. Gemstar combined with TV Guide in a $14 billion deal in 2000.
When News Corp. bought TV Guide, it was a premier publication with a circulation of about 17 million. But the media landscape has changed dramatically since then, with the rise of the Internet and technology enabling people to call up television listings on their computer and TV screens.
News Corp. absorbed a $11 billion charge five years ago to reflect TV Guide's crumbling value.
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