CEO Richard Battista has succeeded in getting Gemstar-TV Guide back to profitability and it looks like principal shareholder News Corporation would like to cash out what's left of its investment after billions in write-offs. Gemstar's board has retained UBS to help it explore strategic options – in other words, conduct an auction. It looks like News Corporation could yet recover over a billion bucks from this ill-fated investment.
There was a time back in the year 2000 when Gemstar was a hot technology company, with its stock trading above 90 bucks. News Corporation did a deal with Liberty Media in 2001 to acquire Liberty's stake in Gemstar and then combine it with TV Guide, which News Corporation had bought a few years earlier for around three billion. Gemstar's interactive TV patents seemed like a good fit to put TV Guide content to new uses. But by 2002 Gemstar was the target of an SEC probe and founder Henry C. Yuen was eventually found liable for securities fraud for inflating revenues. News Corporation was forced to take billions in write-downs and bring in Battista, a former Fox exec, to try to clean up the mess.
Gemstar-TV Guide's stock price is still nowhere near its peak, or even 10% of its peak. But the stock rose to nearly six bucks yesterday after the announcement that a sale was being considered, up more than 12% from the previous close. With almost no debt, Gemstar-TV Guide at six bucks a share is worth about 2.5 billion and News Corporation's 42% stake about 1.1 billion.