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Gemstar Slides as TV Guide Struggles

The programming distributor and magazine publisher sees its shares drop 17% in postclose action.

Updated from May 5

Gemstar-TV Guide International


missed estimates and lowered guidance for the full year.

Shares in Gemstar, which publishes

TV Guide

magazine and operates electronic programming guides, plummeted 20% in early trading Thursday.

For the first quarter ended March 31, Gemstar reported a loss from continuing operations of $13.4 million, or 3 cents per share, compared to a loss of $51.4 million, or 13 cents per share, one year earlier. Analysts surveyed by Thomson First Call had expected a 5-cent profit.

Revenue amounted to $195.2 million for the quarter, up $16.7 million from one year earlier, thanks to nonrecurring payments from consumer electronics manufacturers of $19.4 million.

Citing difficulties with the magazine business, expenses stemming from corporate and intellectual property litigation, and plans to increase investments in key businesses, the company cut its 2-month-old guidance for 2004 operating income. The company says operating income, excluding losses from discontinued operations and the resolution of any legal proceedings, will come in the range of $20 million to $50 million, down from the prior forecast of $44 million to $69 million.

First quarter publishing revenue fell 9.7% to $98.4 million, led downward by declining subscription revenue, partly due to the discontinuance of the company's monthly cable guide.

Cable and satellite revenue grew 18.4% to $42.1 million, thanks to advertising increases at TV Guide Channel, increased subscriber and licensing revenue at TV Guide Interactive, and higher wagering and licensing revenue at the company's TV Games channel.

Consumer electronics licensing revenue -- paid by manufacturers who include Gemstar's program guide technology in their video equipment -- grew $20.8 million to $54.7 million, thanks to the aforementioned one-time revenue.

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As previously announced, the company agreed to sell various satellite distribution businesses to


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. Following the quarter's close, Gemstar received $236 million from EchoStar as part of that transaction. During the first quarter, Gemstar also received $250 million from


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as part of a patent license and distribution agreement.

"The first quarter was a critical period for the Company as we resolved our primary shareholder litigation, entered into broad licensing agreements with Pioneer, EchoStar and Comcast, and sold our non-core and declining SNG businesses," Gemstar CEO Jeff Shell said in a statement. "As a result of these developments, our balance sheet is strong, distribution for our key products is secure, and we have removed many of the distractions that have hindered our Company from realizing the true value of our outstanding array of assets."

Added Shell, "While we have resolved many of our legacy issues, we still have much to do in terms of improving our products, operations, and financial performance."

Shares in Gemstar, which came under the control of major shareholder

News Corporation

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following the departure of legally troubled former management, plunged $1.15 to $4.56.