Investors Wary About Gemstar
Gemstar-TV Guide International Inc. shares fell as much as 26% Tuesday on concern about slower sales of its interactive television-program guides and lack of financial details from the company.
Gemstar shares plunged $10, or 18%, to close at $44.69 on Nasdaq on trading of more than 12 million shares, almost quadruple the three-month daily average. Gemstar shares fell as low as $40.63, cutting the company’s market value by $5.7 billion, to $16.7 billion.
Investors and analysts said they are concerned because Pasadena-based Gemstar failed to include a detailed income statement with its results for the quarter ended Sept. 30, released Monday. Sales fell 1%, hurt by a decline in investment revenue and falling sales at TV Guide magazine.
“Investors grow more wary or suspicious when numbers are left out,” said Jake Dollarhide, a portfolio manager who follows Gemstar for Frederic Russell Investment Management Co. in Tulsa, Okla. “That can lead to a herd-mentality effect” with investors selling shares.
Shares of the largest maker of interactive TV program guides had already fallen 23% this year. Gemstar officials weren’t available for comment.
Gemstar needs more cable- and satellite-TV providers using its software, which lets viewers search programs by category, time and date using interactive TV, CIBC World Markets Inc. analyst John Corcoran said. Gemstar also needs more customers outside the U.S., where No. 1 cable-TV provider AT&T; Corp. is a major customer, he said.
Chairman Henry Yuen said Monday that Gemstar didn’t disclose per-share results because of large write-offs for amortization of goodwill from its $14.9-billion TV Guide Inc. purchase in July.
“Some of these details will be presented in the SEC filing, which we understand will be available very, very soon,” he said on a teleconference after at least three analysts asked for more earnings information. Write-offs “will swamp the type of operating income that we would be able to post.”
Yuen, co-founder of Gemstar in 1989, will be the second-largest shareholder after Liberty Media Corp. transfers its stake to Rupert Murdoch’s News Corp., giving News Corp. a 43% stake. Liberty Media, AT&T;’s cable-TV programming arm run by John Malone, owns 21.3% of Gemstar.
“Wall Street remains somewhat confused by the lack of financial and operational guidance coming from the company,” Corcoran said.
Corcoran cut his rating to “buy” from “strong buy.”
Second-quarter sales fell 1% to $337.7 million from $341 million a year earlier. Sales of TV Guide magazine and some interactive program guide revenue fell 2% to $171.8 million.
