GEMSTAR-TV GUIDE TO EXPAND PACT WITH THOMSON
Gemstar-TV Guide and Thomson are expected to sign agreement in coming weeks that will expand 3-year-old @TV joint venture to integrate former’s interactive program guide (IPG) in broader range of products and include it in 2-way interactive services, Gemstar CEO Henry Yuen told analysts in earnings conference call late Wed. Companies formed @TV in late 1999 as terms for Gemstar’s IPG were extended to 2010, with Thomson pledging to incorporate it in 30 million TV devices in N. America through contract period, including 19” and up TVs and all digital sets. Thomson had integrated Gemstar’s Guide Plus Gold IPG in 6.5 million sets as of Dec. 31, accounting for majority of 7 million CE products containing technology. Zenith also has deployed Guide Plus in its sets.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
New pact will apply to international markets as well and take in products ranging from satellite receivers to DVD recorders and personal video recorders (PVR), Yuen said. Indeed, Thomson is expected to deliver combo DVD player/PVR by Aug. containing Gemstar’s IPG. Gemstar has yet to reach agreement with either Hughes Electronics’ DirecTV or EchoStar, although Thomson is designing former’s receivers so Gemstar’s IPG can be activated remotely if accord is reached, Yuen said. While Thomson also is building receivers for EchoStar, Gemstar is locked in legal wrangle with company and Yuen declined comment. Patent infringement case, in which EchoStar is accused of infringing on Gemstar’s IPG technology, is awaiting International Trade Commission (ITC) decision. New Thomson pact will “broaden our relationship” and “ensure alignment of our interests,” Yuen said. It also will result in dismissal of claim Thomson had filed last Nov. with American Arbitration Assn. (AAA) that alleged Gemstar had breached revenue-sharing and ad agreement related to IPG, Yuen said.
In addition to deploying IPG in wider range of products, Thomson will include it in build-out of 2-way interactive networks. Two-way strategy will be based at least partly on agreement Gemstar signed with PageNet in 1999 to build latter’s wireless paging transceivers into TVs. Transceivers were to distribute IPG and other information using 900 MHz wireless paging technology. Wireless paging will continue to be “core component” of interactive strategy, but will be one several technologies used in building infrastructure for 2-way service, Yuen said. He first hinted at 2-way plans last Aug., but at that time forecast having TVs with technology by end of 2001. “Thomson is looking into the future with interactive TV and moving from being just a well-regarded brand in consumer electronics to where they will be a leading supplier of infrastructure in 2-way response networks,” Yuen said. Thomson spokesman wasn’t available for comment, but company has purchased Technicolor and Philips’s broadcast business as part of effort to expand beyond CE market.
Yuen disclosed Thomson plans as Gemstar said first-quarter net loss plummeted to $207.9 million from $123.2 million as it took $297.8 million charge to write down goodwill. Excluding charge, loss was $20.2 million. Revenue declined to $296.6 million from $342.2 million. Stock compensation expenses also rose in quarter to $16.9 million from $9.1 million, cost that included $12.9 million in accelerated unearned compensation presumably paid to former Co-Pres. Peter Boylan, who left earlier this year. Gemstar’s media and services business, which includes TV Guide magazine and Superstar Netlink C-band satellite business, saw revenue drop to $212.7 million from $255.4 million as earnings before interest, taxes, amortization and depreciation (EBITDA) fell to $50.2 million from $70 million. TV Guide subscriptions declined to 9 million as of March 31 from 9.7 million year earlier as revenue fell to $109.6 million from $137.7 million, company said in SEC filing. Number of Superstar Netlink customers slid 13% from Dec. 31 to 477,000 as sales declined to $63.3 million from $75.2 million. In same period, total C-band subscribers fell 9% to 753,000.
In technology and licensing business, revenue dropped to $61.7 million from $72 million as EBITDA decreased to $11.6 million from $15.7 million. Downturn in revenue was due to Gemstar’s switching from per-unit royalty to recurring revenue, company said. Gemstar accrued $5.8 million in quarter for licensing fees from Scientific-Atlanta (SA), whose agreement with company expired in July 1999 and since has been involved in legal battle. Gemstar has accrued total of $113.5 million since SA pact ended. It also earned $6.8 million in quarter from licensing agreement with AOL that was carried into its merger with Time Warner. Company also earned $12.9 million from joint venture with Thomson that sells advertising on TV’s IPG, down from $15 million year earlier.
Gemstar said revenue from entities controlled by News Corp. declined in quarter to $4.6 million from $7.4 million year earlier. News Corp., which has 42% interest in Gemstar, said earlier this week that it wrote down $4.2 billion of its stake in last quarter. Gemstar shares have lost more than 55% of their value in last 2 months, driven in part by decision in March to write down as much as $5 billion in goodwill in first quarter, mostly related to $14 billion acquisition of TV Guide in July 2000. Gemstar said Wed. it expected write-down still would be $5 billion, but taken over longer period of time. Stock was trading up 2% Thurs. at $9.94.