News Corp. prevailed in its attempts to oust Henry Yuen as CEO of Gemstar-TV Guide International Inc. last week, when former Fox Cable Networks Group head Jeff Shell was named the new CEO of the interactive-program guide vendor.
Yuen will collect $22 million in cash as severance, and remain non-executive chairman of Gemstar. The company said Yuen would focus on international development.
Gemstar's relationship with News Corp., its 42 percent owner, took a turn for the worse in April, when the company disclosed some questionable accounting practices.
Gemstar said that since the end of 1999, it had booked $113.5 million in revenue it hoped it would eventually collect from Scientific-Atlanta Inc. through a patent-infringement lawsuit.
After losing a case it brought against S-A and other companies at the International Trade Commission, Gemstar said it wouldn't recognize the revenue from the set-top vendor. It also announced plans to restate its 2001 financial results, and said it would reverse $20 million in ad revenue that it had booked at its TV Guide subsidiary, which was tied to a barter deal.
Yuen's longtime colleague Elsie Leung, the Gemstar chief financial officer who had booked the questionable accounting items, also said last week that she would resign. Leung, who will collect a $7 million cash severance payment, is being replaced in the interim by News Corp. executive vice president for finance Paul Haggerty.
Because Gemstar must restate its earnings, the company said some of Yuen and Leung's severance payments might be placed in escrow, since it has to adhere to the Sarbanes-Oxley Act.
News Corp. chairman Rupert Murdoch installed Shell as Gemstar chief operating officer in May.
"We became, and remain, significant stakeholders in Gemstar because we believe deeply in the value of Gemstar's technology and assets and their vital role in the emerging digital world," Murdoch said in a prepared statement last week. "Our challenge now is to convert that potential into reality and an important step in that direction is the appointment of Jeff Shell."
Shortly before Yuen's exit, Shell recruited former Fox Cable colleague Ray Hopkins, naming him executive vice president of affiliate sales and marketing.
While Gemstar has long-term IPG license deals in place with AT&T Broadband, Charter Communications Inc. and Comcast Corp., the challenge for Hopkins and Shell will be to cut deals with Cox Communications Inc., Time Warner Cable and Cablevision Systems Corp.
Some of Gemstar's competitors said last week that they see an opportunity because of the tumultuous condition of the company.
"If News Corp. really takes control, operators would be scared or concerned if a major content owner owns the guide," iSurfTV Corp. vice president of marketing Katherine Marshall said at a Paul Kagan Associates conference in New York.
Gist Communications vice president of business development Alison Green also said she sees new opportunities with the shakeup at Gemstar.
"What we're hearing is that operators are rethinking the risk of using other guide players," Green said. "Whether they go remains to be seen. But all of this adds up to an exciting time of change."
Investors seemed pleased with news of Yuen's exit. Shares in Gemstar jumped from $2.59 to $3.25 last Wednesday, the day after the announcement was made.