Sometimes news is like
George Foreman: Even if it's old and getting stale, it still packs a punch.
That's what happened to
Gemstar-TV Guide International
Friday after a newspaper report about what appeared to be two-month-old news sent the company's stock down as much as 19%.
The stock's Friday slide reflects, in part, investor jitters about Gemstar, which is waiting for the scheduled June release of
a key patent-related courtroom decision, and which
unpleasantly surprised Wall Street earlier this month with its revenue recognition policy.
Near noontime Friday, shares in Gemstar, a developer of an interactive, on-screen television programming guide, were down $1.64, or 15%, to $9.50.
The epicenter of the shock to Gemstar's stock was apparently a story in Friday's editions of
The Wall Street Journal
about a report by a staff attorney at the International Trade Commission concerning a patent case Gemstar initiated against
and other companies. That case -- the one scheduled to be decided by June 21 -- is seen as a key test of Gemstar's ability to reap licensing revenue from its interactive programming guide.
story said the report, prepared last year, was made public only this week. In addition, noted the article, the report indicated that the staff didn't believe Gemstar's patents had been infringed upon, and that staffers believed Gemstar had engaged in patent misuse.
All of this is true, apparently. But analysts and the company say the content of the report has been widely known since at least February.
"This is old news. Only the details are new," says John Corcoran, an analyst at CIBC World Markets who has read the newly posted report. Corcoran, whose firm hasn't done banking for Gemstar, has a hold rating on the stock.
Furthermore, says Corcoran, the details, though interesting, aren't significant. "Is there something that changes my opinion regarding the likelihood of whether Gemstar prevails before the ITC?" asks Corcoran. "The answer is no."
The essence of the staff's report was already widely known in mid-February, when Goldman Sachs analyst Richard Rosenstein reiterated his belief that it was "highly unlikely" Gemstar would lose the ITC case, and attempted to put the staff's report into perspective. Among the other caveats Rosenstein noted for people who might draw conclusions about the case's outcome from the report, the staff attorney is not a member of the judge's office; in the past, that particular attorney's opinions have differed from the judge's final determination; and the judge in the case, Paul Luckern, has, in similar cases in the past, never found that a patentholder accused of patent misuse has done so.
Corcoran says his research indicates that patent misuse is a rare finding at the ITC.
Meanwhile, one interesting detail in the now-public report is that it was, in fact, prepared with admittedly incomplete evidence. The attorney notes that he was unable to attend all of a series of depositions conducted during one week last fall, and had not fully analyzed all the transcripts from those depositions.
"This information from the staff attorney is a pretrial opinion dated back in November, in which the staff represented conclusions based on their understanding of what the evidence
be during the hearings," says a Gemstar spokeswoman. "Based on that, this information is neither new nor the staff's final opinion in this case."
Continues the spokeswoman, "The company remains confident in our position and in the documents and evidence we submitted. Judge Luckern is the one who will make the final determination in the case."
In the meantime, it's a free-for-all in the jury room of public opinion.