Settlement Removes Cloud Over Gemstar

Gemstar-TV Guide International Inc. has settled a group of shareholder lawsuits for $67.5 million in cash and stock, the publisher of TV Guide magazine said Thursday, the same day a federal appeals court revived the company’s patent suit against a competitor.

Both events were considered welcome news for the troubled Hollywood-based company, which is facing a federal investigation into accounting irregularities. Analysts noted that the settlement amount, though large, lifts at least one of the clouds hanging over Gemstar.

“This really helps the company focus on the business going forward,” said April Horace, an analyst at Janco Partners Inc. “They really inherited these shareholder suits from the previous management.”

The company settled the consolidated shareholder suits for $42.5 million in cash and 4.1 million shares of stock valued at $25 million. It wouldn’t reveal how many shareholders were included in the settlement or how much they would receive.

“This settlement is a significant step in Gemstar-TV Guide’s efforts to resolve the legal issues that have faced the company,” Jeff Shell, who became chief executive in 2002, said in a statement. “As we put the issues related to past management behind us, the new executive team can focus more completely on maximizing the opportunities for growth and development in front of us.”

The settlement of the suits, which were filed in federal court in Los Angeles and related to alleged accounting and financial reporting improprieties at Gemstar, didn’t resolve other shareholder suits or securities fraud cases still pending against the company, Gemstar said.

Last month, the Securities and Exchange Commission filed suit against three former Gemstar executives, alleging they participated in a “widespread and complex scheme” to inflate revenue and mislead investors.

The SEC filed a similar complaint in June against Henry Yuen, Gemstar’s founder and former chief executive, and Elsie Leung, its former chief financial officer. They were ousted in 2002 after Gemstar’s accounting scandal came to light. When the scandal wiped out billions of dollars of shareholder value, News Corp. took control of it.

In the patent suit, meanwhile, the U.S. Court of Appeals for the Federal Circuit in Washington ruled that a federal judge in North Carolina incorrectly interpreted patents related to on-screen TV program guides. The judge had ruled that satellite TV service EchoStar Communications Corp. and makers of television set-top boxes didn’t infringe Gemstar’s patents, but the appeals court ordered the case returned to the trial judge for reconsideration, based on a new interpretation of the patents.

EchoStar, based in Littleton, Colo., declined to comment on the ruling.

“Obviously, Gemstar needs to protect its assets, especially its patents, but I don’t think even winning the patent lawsuit is going to necessarily accelerate its core business plan,” Horace said.

Gemstar, which plans to release its fourth-quarter results March 2, also said Thursday that it would record a pretax charge of $67.5 million for the lawsuit settlement, along with a noncash charge of $400 million in write-downs related to TV Guide magazine.

TV Guide’s circulation and advertising sales have fallen over the last two years as Gemstar focused on its other businesses, which develop on-screen program guides for cable TV and sell ads within the guides.

Gemstar’s shares rose 46 cents to $7.46 on Thursday on Nasdaq. The company’s stock has climbed 21% in two days.

Times wire services were used in compiling this report.