Rovi Warns On Q2 Results, Lowers Full-Year Expectations


Rovi will miss second-quarter targets and lowered full-year 2012 revenue and earnings expectations, with the entertainment-technology company citing product delays and an inability to reach patent-licensing deals.

For the quarter ended June 30, Rovi currently expects revenue of approximately $158 million, compared to $179 million for the second quarter of 2011, with a loss between 15 and 18 cents per share. Wall Street analysts had expected Rovi to post revenue of $182.6 million and earnings per share of 57 cents, according to Thomson Financial Network.

The company said "delays in adding new patent licensees in key growth areas including [consumer electronics] manufacturers, the TV Everywhere field of use in the U.S. and for the television field of use with service providers in Europe" contributed to its lower-than-expected Q2 results.

"We don't anticipate ultimately losing revenues as a result of these delays, and we continue to anticipate significant growth in our licensing business from 2011 to 2013," Rovi president and CEO Tom Carson said in a statement. "However, in order to ensure the long-term protection of our key intellectual property, we did not sign certain new patent licensing agreements during the second quarter, as some expected licensees would not agree to acceptable terms."

Carson added that certain other deals with first-time licensees are "simply taking longer to close than anticipated. We expect to come to acceptable terms with these parties later this year or in 2013, and we expect these deals will include catch-up payments to make Rovi whole for the pre-license period."

Rovi also Tuesday lowered its expectations for adjusted pro forma revenue for the full year of 2012 to between $650 million and $680 million and lowered its expectations for full year adjusted pro forma income per common share to between $1.60 and $1.90. In May, Rovi had said it expected adjusted pro forma revenue for the full calendar year 2012 to be between $755 million and $785 million and income per common share to range between $2.35 and $2.65.

For the second quarter, Rovi said revenue in its consumer-electronics segment is expected to be down approximately $21 million from the same period last year, primarily as a result of an anticipated decline in analog content protection (ACP) revenues.

However, CE sales in Q2 also were hurt by fewer licensed device manufacturers than anticipated and a reduction in royalty-bearing unit sales reported by many device manufacturers, Rovi said.

Other factors contributing to lower sales in the second quarter were delays in launches for certain products and services, including the Rovi Entertainment Store, new DivX content creation software, DivX Plus Streaming and digital terminal adapter (DTA) guides, as well as lower-than-expected results for Rovi's online properties, video advertising and commerce tools and Total Guide for CE.

"To a large extent, we were impacted in the second quarter by softness in the global consumer electronics and interactive TV advertising markets, which particularly affected the growth of our Total Guide solution for CE and our advertising business," Carson said. However, "it has become clear that there are several areas of product management and development that we need to improve in order to better capitalize on these opportunities."

Rovi is conducting a review of its operations aimed at improving execution and has been developing a new strategic plan to address areas "where we can grow our business," added Carson, who was named CEO in December 2011.

Last month Corey Ferengul, Rovi's executive vice president of product management and strategy, resigned to pursue "other business opportunities," the company said.

Rovi is scheduled to announce full Q2 results on Aug. 2.