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To: alankeister who wrote (25726)	6/2/2000 1:27:00 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Alan, Stating the EPG ad revenue is critical to Gemstar's success as a testimonial to help add more advertisers to the ranks at higher and higher dollar volumes. Even though the financials have never broken out EPG ad revenue, Henry has made a point of doing that in conference calls. My guess (hope) is that tradition will continue for at least a year or two after the merger. That would be consistent with what AOL did when it was trying to build an interest in a new advertising medium. Second, I would hesitate to declare an EPG ad revenue tornado yet since there isn't much history. If I remember, they collected only $1.8M. When you start at $0, any increase is huge when measured as a percentage. I agree. That's why Ii want to be very sure of the revenues or an EPG/IPG unit count before I declare a tornado. On the other hand, I used similar reasoning when evaluating the CRM tornado even though I was already in the game before the game was invented. Because I was so hesitant to consider the smaller numbers worthy of a tornado count, I never appreciated evidence of the tornado until it had happened. Identifying the tornado is easier in some cases than in others. It is simple evaluating CDMA growth. It's not so simple evaluating EPG/IPG growth. --Mike Buckley

To: alankeister who wrote (25726)	6/2/2000 6:33:00 PM
From: Eric Jacobson	Respond to of 54805

alankeister, you raise a couple of good points regarding GMST's ad revenues. I agree with you it will be hard to track ad revenues on a comparable basis once the merger goes through. On your second point, I also agree we need to be careful comparing current numbers against very small numbers from a year ago since the percentage growth is somewhat overstated in proportion to the size of the total revenues. The problem with declaring a tornado in real time is that it's impossible to definitively declare a tornado until it is obvious to everybody, usually with the benefit of hindsight. By then it becomes obvious that the tornado has, in fact, been swirling around for some time and, as Mike suggested, we just didn't heed the storm warnings. For example, I just went back and checked my CHKP Project Hunt report. Over they past five years, they had YOY revenue growth of 1168%, 243%, 150%, 64%, and 55%. In hindsight, it's obvious the company went through a tornado. Back in 1995 when they were experiencing the 1168% growth, I suppose somebody could have said they weren't sure whether this was the real deal since the YOY comparisons were against such a small base (less than $2 million in total revenues). In hindsight, they would have been wrong - the winds were swirling all around them the whole time. I think we're in a similar situation with GMST right now. There's no doubt in my mind that what we're seeing is a small tornado. When it comes to determining whether this will turn into the tornado that can define a Godzilla, I think we should look at it in terms of probabilities. There's a probability that it will increase in force, touch down, and do a lot of damage. However, there's also a probability that it will fizzle out. Each of us needs to keep this in mind when making investment decisions. I've been tracking it for the past year, and all I can say is that so far it hasn't fizzled out. Next quarter might be a different story, which is why it's important to track it. In the end, the numbers will tell the story. Personally, I'm about 90% certain that we're seeing a small tornado that is likely to increase in strength (this is up from probably 60% or 70% last quarter after only four quarters of data). There's multiple reasons for this, most touched on by tinkershaw in a recent post: First, GMST's installed base is growing and it doesn't seem at all probable that the installed base will stop growing, which means there will be more and more eyeballs on the EPG. Second, more advertisers will be attracted to the EPG once the number of eyeballs reaches certain critical mass thresholds. This is likely to occur within the next year even without the TV Guide merger and is a certainty with the completion of the merger. Third, the cost of advertising (not just the future ads, but also the existing ads) on a per page basis will increase in relationship to the number of eyeballs viewing the EPG. GMST had $180,000 in ad revenues in FY99, and $3,225,000 in FY00. This represents YOY growth of 1,692% growth (Mike, check my numbers). In order for us to be absolutely certain this is a tornado, I'd guess they'd need between 200%-300% growth over the next year, or between $6.5 and $9.7 million in ad revenues in FY01. I'm 90% certain this is going to happen but, like I said above, in the end the numbers will tell the story.