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Macrovision Keeps Turnaround Moving

Shares fall after the company misses earnings estimates, but the plan is in place for higher profit growth.

SAN FRANCISCO - Shareholders took Macrovision (MVSND) down a notch Thursday after the company posted slower growth for the first quarter, missing Wall Street estimates.

But the heavy lifting of a merger and restructuring is largely behind it - and investors may have received an entry point, if they're willing to wait to reap the upside.

The stock was down 96 cents, or 5.9%, to $15.18 after the company said Wednesday that its traditional analog software business fell.

Yet Macrovision executives were upbeat on the conference call, coming off a just-completed a merger with Gemstar-TV Guide and a realignment of the core business around new digital software patents and integrated TV programming guides and services. Macrovision is in the process of selling off noncore product lines, including

TV Guide


In downgrading Macrovision shares to hold Thursday, Deutsche Bank analysts wrote that the long-term opportunity in the stock appears significant, but that shares will be range-bound for the better part of 2008. The firm makes a market in shares of Macrovision.

Macrovision projected combined 2008 revenue growth of 11% on an adjusted, pro forma basis, for a range of $650 million to $700 million. Earnings before interest, taxes, depreciation and amortization will be from $230 million to $270 million, said CFO James Budge.

"The ability to stream-line the business around digital media technologies should lead to a higher-growth and more-profitable company heading into 2009," Deutsche Bank's Todd Raker and Brian Thackray wrote.

The content-protection-software company has put more than half of its restructuring behind it as it moves away from its traditional analog software, positioning itself for growth as the world switches to digital television.

CEO Fred Amoroso said Wednesday that Macrovision will measure its success in 2008 by new contracts among its four customer groups: cable and satellite operators, consumer electronics brands, portals, and content producers, such as movie studios.

Among the new contracts announced for its software or programming guides,


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is integrating TV Guide Onscreen into television sets;


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will build a TV programming option into the Wii; device maker

Umax Systems

licensed patents for set-top boxes and TVs; and


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expanded its use of Macrovision patents worldwide.

Revenue is recognized after consumer electronic products are shipped, and Macrovision's growth will be determined by the popularity of a brand's product, Amoroso said. The company does not expect to see significant product shipments until 2009. "We are still in early phases of these opportunities."

Also, within the past week


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began offering to the domestic market a mobile TV system licensing Macrovision patents, Amoroso said. During the quarter, more than 20 customers licensed the company's metadata software, which is embedded into DVDs.

Another reason the company is bullish on its future: Macrovision made a bet in 2007 on what has since become the winner of the DVD-format wars. The company's BD+ software, acquired last year, is a key component of Blu-ray content security. Budge said prospects for the company's content-protection business "are brightening since Blu-ray won the format war."

One studio has signed a contract for BD+, while another two movie studios are testing the software, Amoroso said.

The company's guide cable and satellite subscriber base grew 14% year over year, to 78.8 million households. Subscribers to Macrovision's mobile-device guides grew 60% in Japan to 24 million users.

In content protection, Macrovision's studio clients already include


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News Corp.'s

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Fox, and its set-top-box customers include


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Scientific-Atlanta division and



. Major cable and satellite clients include


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Budge said the company would be restored to its traditional stock symbol MVSN on June 2.