TVG's Parent Company Reports Greater Third Quarter Losses

The TV Games Network's parent company reported a 13.5% increase in net loss for the third quarter ending Sept. 30. Gemstar-TV Guide, which primarily licenses interactive television programming, reported a net loss of $131.5 million, or 32 cents per share, compared with a net loss of $115.8 million, 30 cents per share, for the third quarter of 2000.

The increase in losses was attributed to charges related to the merger between Gemstar and TV Guide in July 2000 and to higher operating expenses. The net loss included an amortization charge of $240.4 million, more than 90% of which stemmed from the July 2000 merger between Gemstar and TV Guide.

Growth in the licensing of its interactive technology and deployment of its interactive program guide increased third quarter revenue by 8% to $335.1 million from $309.8 million.

On a conference call with analysts, Gemstar-TV Guide chief executive Henry Yuen reaffirmed financial targets, including projected revenues of $1.355 billion for all of 2001 and earnings before interest, taxes, depreciation, and amortization (EBIDTA) of $453 million.

TVG, a 24-hour horseracing and wagering network, is part of Gemstar-TV Guide's media and services sector. The sector reported a 6% decline in third quarter revenue to $227 million and a 7% drop in EBITDA to $59 million compared with the same period last year. Reduced earnings and revenue were attributed to declines in subscriptions and advertising revenue for TV Guide, the main revenue producer for the sector.

For the first nine months of the year, the media and services sector reported a 193% increase in revenue to nearly $720 million and a 184% increase in EBITDA to $192 million.

Gemstar-TV Guide (Nasdaq:GMST) suffered a setback this quarter when Rubert Murdoch's News Corp., which owns about 38% of Gemstar-TV Guide, failed to clinch a long-sought deal to acquire the leading U.S. satellite broadcaster DirecTV. Gemstar-TV Guide did not expect any revenue from the deal but expected it to allow a wider rollout of Gemstar's technology.

The company said it would focus on securing licensing revenue from No. 2 satellite broadcaster EchoStar Communications (NasdaqNM:DISH), the winning bidder for DirecTV in a $23.7 billion deal that now faces scrutiny from anti-trust regulators.

Gemstar has challenges pending in federal court and before the International Trade Commission because of alleged infringements on its patents by EchoStar and set-top box makers Scientific-Atlanta and Pioneer Corp. Gemstar said on Wednesday there have been no recent negotiations with Echostar regarding the pending litigation.

"We like our legal positions and are fully prepared to go after him and win," said Peter Boylan, Gemstar-TV Guide's co-president and co-chief operating officer, referring to EchoStar chief executive Charlie Ergen. Boylan described Ergen as "a truly last-minute negotiator.''

"There is no way he can evade the strength of our patents," Boylan said.

Shares in Gemstar-TV Guide fell from $49.59 in July to a three-year low of $16.05 in late September. The shares have lost 48% this year.

Information from Reuters contributed to this report.