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Macrovision

Macrovision. Ben Hier Dave Light April 22, 2008. Agenda:. Position Background Macrovision Overview Gemstar Acquisition Gemstar Overview and Financials Macrovision Financials Recommendation. Position Background. Bought 200 shares @ $75 (April 2000)

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Macrovision

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  1. Macrovision Ben Hier Dave Light April 22, 2008

  2. Agenda: • Position Background • Macrovision Overview • Gemstar Acquisition • Gemstar Overview and Financials • Macrovision Financials • Recommendation

  3. Position Background • Bought 200 shares @ $75 (April 2000) • Bought 300 shares @ $25.04 (April 2007) • Sold 200 shares @ $26.40 (November 2007) Chart from Google Finance: http://finance.google.com/finance?q=mvsn

  4. Macrovision • Focus: Empowering customers to enable consumers to enjoy digital media on their terms • Leading Technology IP Licensing Provider • Core technologies: protection, distribution and enhancement • Focus on creating recurring revenue Macrovision (2007). Annual Report 2007. From SEC EDGAR database http://sec.gov/edgar Macrovision Lenders Presentation. April 9, 2008

  5. Macrovision: • Entertainment Business Unit • Allows Producers and Operators to safely deliver and distribute entertainment • Ensure the users pay for each use • Prevents copying of content • Customers pay one-time fee and/or recurring fees depending on content structure Macrovision (2007). Annual Report 2007. From SEC EDGAR database http://sec.gov/edgar Macrovision Lenders Presentation. April 9, 2008

  6. Macrovision: • Embedded Solutions Business Unit • Focuses on consumer electronics • Content protection • Media Enabled Devices • Sells directly to CE Manufacturers • For enabled devices, users pay per unit royalties Macrovision (2007). Annual Report 2007. From SEC EDGAR database http://sec.gov/edgar Macrovision Lenders Presentation. April 9, 2008

  7. Macrovision (spark notes): • Manages complexity of selling content online • Helps customers protect and license digital content • Helps customer grow revenues by selling content through more distribution channels • Ensures product lines are optimized for the digital home (use on multiple devices) Macrovision (2007). Annual Report 2007. From SEC EDGAR database http://sec.gov/edgar Macrovision Lenders Presentation. April 9, 2008

  8. Macrovision’s Strategic Investments & Divestitures

  9. Macrovision Agrees to Buy Gemstar • $2.8B Transaction • 51% MVSN Approval Needed & 67% GMST Needed • 56% Cash ($1.6B) / 44% Stock ($1.2B) • GMST - $6.35 in cash or .2548 MVSN • Pro Forma Ownership • Macrovsion (53%) / Gemstar (47%) • MVSN will raise $650M in debt • $500M Term Loan & $150M (Senior Unsecured “High Yield”) • Corporate Ratings: Ba3/B+ (Stable/Positive) • Senior Secured: Ba1/BB- • Pro Forma Leverage 4.3X 2007 Adjusted EBITDA Junk Rating Company Presentation to Lenders 4/9/08

  10. Deal Impact • No indication by MVSN management regarding accretion/dilution • Estimate $46M in synergies within 270 days • $30.627M related to headcount reduction • “Top-line synergies are likely to remain limited.” - Goldman Sachs’ Sasa Zorovic Barron’s Online 12/10/07 Company Presentation to Lenders 4/9/08

  11. Going Digital Company Presentation to Lenders 4/9/08

  12. Gemstar TV Guide • Gemstar is a global media, entertainment, & technology company • Leading provider of video guidance • TV, Print,& New Media Properties • NASDAQ Listed (GMST) • News Corporation (NWS) owns 41% of (GMST) • July 2007 – “Explore Strategic Alternatives” • MVSN Sole Bidder 2007 10-K

  13. Gemstar’s Segments

  14. Gemstar TV Guide Google Finance

  15. GMST Valuation

  16. Macrovision Google Finance

  17. Macrovision DCF Beta from Yahoo Finance (http://finance.yahoo.com/q/ks?s=MVSN) Rd from Macrovision (2007). Annual Report 2007. From SEC EDGAR database http://sec.gov/edgar

  18. Macrovision DCF • Under our most accurate model • Current Stock Price: 14.19 • DCF Valuation: 12.60 • Utilizes optimistic WACC • Low beta of 1.38 (Google Finance = 2.13) • Optimistic about earnings potential in 2008. • Jump from $0.58 to $0.71

  19. Conclusion • Major Acquisition • Both companies trading above their current DCF valuation • Lack of proven managerial expertise • Larger, more diversified company • Utilizing debt for the first time • Sell 300 shares at the market

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