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Technology Stocks : Gemstar Intl (GMST) -- Ignore unavailable to you. Want to Upgrade?

To: surpow who wrote (2467)	3/21/2000 11:08:00 PM
From: Mike Buckley	Read Replies (2) \| Respond to of 6516

Noah, I certainly hope I'm joined by many in response to your query about defining events for Gemstar. I was wondering if you would share your view on the proposed TVGIA merger? Do you consider it a key moment? Also, are you watching any other scenarios that once played out would be considered key moments in this company? Since you brought up the subject in context of the news worthiness of the Qualcomm/Ericsson deal I'll put the TV Guide/Gemstar merger in that context. One way of looking at the merger is that it is a resolution of the adversarial relationship between Gemstar and TVGuide. The merger "makes nice" all the way around, contrasting the situation in which Ericsson remains part adversary, part customer of Qualcomm. The less optimistic way of looking at the merger is that, by removing TV Guide as a potential royalty-paying customer, the potential for a certain kind of link in Gemstar's value chain is also removed. Though there is that one aspect which is less than ideal, it shouldn't obscure the fact that the cessation of the stand-off will help the rate of adoption just as the Q/Ericsson resolution has already helped CDMA adoption. I don't remember if you were around when the discussion about defining events took place in the G&K folder, but based on that discussion we could easily suggest that the merger or some similar resolution was brought about because the forces of product adoption were the catalyst that caused the disputes between TV Guide and Gemstar come to an end. If that is true, it's critical that we recognize it as an indication that the tornado recently began prior to the settlement, that the tornado will immediately start as a result of the settlement, or that the tornado will very soon begin. How each of us might think of those three possibilities depends primarily on whether we use the most conservative way of measuring the tornado, basing it entirely on growth of revenue directly related to the licensing of EPGs and IPGs, or some less conservative way that isn't entirely "by the book." Another aspect of the merger is that the combined entity makes it virtually impossible for there to be more than one Gorilla candidate in the business of selling IPGs. If it were not for the consideration that all Gorillas come from tornados and that the question of the existence of a tornado remains disputable, I would have crowned Gemstar the Gorilla based on the resolution of the dispute with TV Guide. (Not that Gorillahood requires my seal of approval.) As for other key events, it's especially interesting that unlike so many Gorillas, there is the Godzilla potential which will come to fruition only once the Gorilla potential is realized. The next key event I will be looking for is growth of advertising revenue that speaks to the Godzilla potential and, in turn, is a harbinger of the shared e-commerce revenue that will come later. Less important issues than the ones you asked about that I'll be following are the post-merger leveraging of the combined entity's assets, the structure of the company and the ramifications of that structure, and the development of the e-book value chain. The biggest potential for a negative view I'll be closely monitoring is the extent to which the rate of overall revenue growth will be slowed due to the slower growing businesses TV Guide brings to the table. Again, I hope others join in this discussion. --Mike Buckley