The interactive-program-guide war will wage on, after
United Video Satellite Group Inc. withdrew its $2.8 billion hostile-takeover bid for
Gemstar International Group Inc. last week.
Officials at UVSG, after refusing to raise their
$45-per-share offer for Gemstar, said they will move on without Gemstar and continue
deploying their existing interactive program guide, the Prevue Interactive digital-box
navigator. UVSG is controlled by Tele-Communications Inc.
"We continue to be the guide provider of choice for
TCI," said Gary Howard, UVSG's chairman and CEO. "We're in every
digital box that they deploy. And we continue to work with other MSOs."
If UVSG had succeeded in acquiring Gemstar, it would have
gained access to Gemstar's 60-plus patents relating to program guides. That would
have put an end to the tangled legal battle over those intellectual properties between
UVSG and Gemstar unit StarSight Telecast Inc. TCI has already deployed about 400,000
digital set-tops with Prevue Interactive, but some MSOs are awaiting a resolution to the
patent lawsuits before they commit to a branded interactive program guide.
"[UVSG's failure to acquire Gemstar] means that
UVSG will ultimately go at a slower pace," said analyst Mark Riely of Media Group
Research Inc. "They wanted to put the patent issues behind them. And they wanted to
bring everything under one umbrella and go ahead at warp speed."
Even after UVSG pulled its offer last week, both sides were
squabbling. In a press release, UVSG president Peter Boylan said, referring to the patent
litigation, "We are very pleased with the trial that recently concluded in Tulsa
[Okla.] in our litigation against Gemstar's StarSight subsidiary. We look forward to
a decision that confirms our position that StarSight's patent at issue in the case is
invalid and unenforceable."
In response, Gemstar general counsel Larry Goldberg issued
a prepared statement charging that Boylan's comments about the trial were
"inaccurate and misleading." Goldberg said the patent trial isn't over,
that "evidence has been received with respect to only one of 10 patents involved in
the suit," and that closing statements haven't been made regarding that one suit
Howard called the dispute a matter of semantics and
"wordsmithing," noting that the trial was virtually over, with the only things
left to happen being the submission of final legal papers and final appearances in court
Howard characterized UVSG's offer to Gemstar as
"fully and fairly priced," adding that the financing was lined up so that the
deal could have closed quickly.
Earlier this month, Gemstar's board rejected
UVSG's offer. UVSG claimed that it had the support of part of Gemstar's board:
chairman Thomas Lau, who controls 24 percent of the stock, as well as board
representatives from Viacom Inc. and Thomson Consumer Electronics.
UVSG made its announcement late last Tuesday afternoon. Its
shares rose by $1.31 last Wednesday, but they fell back by 87 cents last Thursday, closing
Howard cited a number of reasons why the merger of UVSG and
Gemstar would have benefited both companies, aside from their combined patent portfolio:
They could have eliminated redundant costs for research and development, as well as
content; Gemstar would have access to UVSG's sales infrastructure; UVSG would have
the advantage of Gemstar's international presence; both companies could have
presented a united front to advertisers for interactive advertising; and they would have
footholds in both cable and consumer electronics.
"The synergies were very positive," Howard said.
UVSG has a strength in cable with The Prevue Channel and
Prevue Interactive, while Gemstar's forte is consumer electronics, with its guide
technology embedded in TV sets and its video-recording technology in VCRs and TVs, and
with licensees such as Microsoft Corp.
"Gemstar has a strong consumer-electronics presence;
we don't," Howard said. "We have a strong cable presence; Gemstar
Gemstar president Henry Yuen said his company has already
licensed its interactive-program-guide technology to Scientific-Atlanta Inc., which is
using it in native guides in its set-tops.
Gemstar is also in talks about licensing its technology to
General Instrument Corp. Yuen added that Gemstar's interactive guide will be part of
the Microsoft Windows CE operating system if it is incorporated into cable boxes.
In all, Yuen said, there 2 million boxes in the market that
can provide Gemstar's interactive guide, with about 500,000 subscribers actually
receiving it. He added that cable boxes represent only about 10 percent of Gemstar's
"We certainly have a lot of prospects going for
us," Yuen said.
Earlier this year, Gemstar and UVSG had agreed to a joint
venture that would have settled their lawsuits, but that deal fell apart.
Mike Galetto contributed to this story.