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Macrovision's Gemstar deal a question of timing - December 7, 2007

The biggest question confronting Macrovision in its $2.8 billion acquisition of Gemstar-TV Guide is timing. Will it have enough time, given the $800 million in new debt it's taking on, on top of its other recent acquisitions of Self Protecting Digital Content and Mediabolic, to realize its ambitious vision before the financial roof caves in?

Asked another way, will the many, many obstacles still standing between Macrovision and the world of seamlessly networked content, devices and services it wants to enable be overcome before the financial burden of assembling the technological pillars of that world become unbearable?

The market certainly has its doubts, sending shares of Macrovision down 20% on the announcement, its deepest one-day cratering in more than six years of trading, while also the back of its hand to Gemstar's stock.

In a conference call with analysts Friday, Macrovision CEO Fred Amoroso laid out a dazzling vision of consumers finding, accessing and managing all of their media content across a broad range of fixed and mobile devices using Macrovision software and middleware, all while ensuring copyright owners safe and secure transit of their content.

The problem for Macrovision is that many things it can't control must happen for Amoroso's vision to be realized:

• Content owners must decide they want their content moving around like that;
• Technical standards must be agreed to;
• Service providers must agree to let content they have provided the consumer be passed to other devices or services;
• Windows must be sorted out;
• Consumers must accept whatever usage and rights terms content owners impose.

I could go on, but you get the point. It's a grand vision, but there are a lot of moving parts.

"Look, I recognize this is a complex transaction, no kidding," Amoroso said on the call. "You've got a little company, you've got $800 million of debt, there are certainly questions, the debt markets haven't been the most robust and all of that. But you know what? We don't make decisions as a factor of what the immediate first-day market reaction is going to be ... I have a confidence and a high expectation that as we continue to work over the next few months on integration -- and beyond that after closing -- that this is going to be an enormous value for our stockholders."

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