You're smart, you're a fighter, and you built this company up from nearly nothing. Boy, are we happy to see you go.
That's the message that Wall Street sent
Gemstar-TV Guide International's
Henry Yuen Wednesday. Investors bid up the company's shares on news that Yuen, the longtime CEO, was stepping down along with Elsie Leung, chief financial officer.
The pending resignations, which Gemstar first hinted were possible in mid-August, conclude a power struggle between Yuen and Gemstar's biggest shareholder, Rupert Murdoch's
. Yuen led the company from its original product, a simplified system for programming VCRs to record TV shows, to its current flagship product, an interactive, onscreen guide to programming on TV.
But in recent months, News Corp., like other shareholders, has become increasingly and publicly dissatisfied with the management at Gemstar, whose share price has stumbled from problems such as adverse court decisions in patent litigation, disputed revenue recognition practices, and the impact of a soft advertising market on the print magazine
. Gemstar acquired
in 2000 in the deal that gave News Corp. a major stake in the company.
Shares in Gemstar, down 90% from their 52-week highs, bounced back Wednesday on the news that Yuen and Leun will be stepping down from their executive posts. By midday, Gemstar's shares rose 63 cents, or 24.7%, to $3.23.
Yuen will remain as nonexecutive chairman of Gemstar's board, according to the "agreement in principle" announced Tuesday night, and Leung will remain on the company's board. The company says that under a five-year agreement, Yuen will lead a business unit formed to pursue "international business development opportunities" and will work on improving the company's interactive technologies.
Replacing Yuen as CEO will be Gemstar's co-president and chief operating officer, Jeff Shell. He joined Gemstar this spring at News Corp.'s behest as part of an effort to improve relationships with cable TV operators and satellite systems. News Corp.'s executive vice president of finance, Paul Haggerty, is slated to become Gemstar's acting CFO.
Yuen will receive $22 million in cash, and Leung will receive $7 million, says Gemstar, as termination payments under their existing contracts.
Sell-side analysts agreed that change was good for Gemstar, but not the solution to all its woes. SoundView Technology's Jordan Rohan upgraded the company from underperform to neutral. Though fundamentals at the company are weak and litigation concerns persist, Rohan says further downside is limited, and
alone is "arguably" worth $2-$3 per share. SoundView hasn't done banking for Gemstar.
Salomon Smith Barney's Niraj Gupta says that Shell has already helped improve Gemstar's relationships with cable operators, and is optimistic that problems at
can be improved by a closer relationship with News Corp. Gupta, whose firm owns more than 1% of Gemstar's stock, continues to rate it underperform.
Because of delays in filing its quarterly results for the second quarter ended June 30, Gemstar has been threatened with delisting from Nasdaq. A hearing on the subject was held late last month, but no outcome to the issue has been disclosed.