Q3 2009 Earnings Call

November 3, 2009 5:00 pm ET

Q2 2009 Earnings Call

August 06, 2009, 5:00 pm ET

by Yulitza Peraza

Since the start of 2008, Macrovision (MVSN) has put on hold its previously active acquisition program and has instead focused solely on divestitures. Now, it looks like the company may be done shedding businesses and may actually look to add them. The switch comes as Macrovision dumped its tremendously unprofitable eMeta business for an estimated $800,000 in November (down significantly from the $35m it paid for the unit in 2006), and finally closed its $255m TV Guide Network sale to Lionsgate (LGF) in March. Macrovison popped back up as a buyer for the first time in 10 months in mid-April, purchasing Muze from Enterprise Partners Venture Capital for $16.5m.

Q4 2008 Earnings Call Transcript

February 25, 2009 8:00 am ET

Over the past several weeks, MagicDiligence has been ranking stocks on two of the Magic Formula Investing screens by several well known value and momentum statistics that have been shown to outperform the market in James O'Shaughnessy's book What Works on Wall Street. For those that missed them:

• Highest Dividend Yield
• Best 1-year Relative Strength
• Lowest Price-to-Sales Ratio
• Lowest Price-to-Book Ratio

For the final article in this vein, we're going to combine all of the rankings into a cumulative chart, a quantitative measure of the most undervalued stocks on the MFI screen. The methodology here is simple. All of the stocks in the two MagicDiligence MFI screens, the top 100 over 50 million and the top 50 over 2 billion, were first ranked 1-130 (there were 20 stocks on both screens) in each category. For example, the stock with the lowest price-to-sales ratio gets 1 point, while the highest price-to-sales ratio received 130 points. Then this procedure was duplicated for dividend yield, relative strength (1-year performance), and price-to-book ratio. When a number of stocks held the same value, the ranking assigned was the same number to all matching stocks (for example, all non-dividend paying stocks earned a rank of 55). A cumulative score was achieved by adding the 4 rankings together. The goal is to find the stocks that ranked the highest on average across all statistics.

The next value metric we will add to the current Magic Formula list is the price-to-book ratio. Previously, we've covered Magic Formula stocks with the:

• Highest Dividend Yields
• Strongest Relative Strength
• Lowest Price-to-Sales Ratio

Price-to-book is one of the oldest and most intuitive value investing statistics. The "bible" of value investing, Benjamin Graham's The Intelligent Investor, uses the price-to-book ratio as the main criteria for finding undervalued stocks. Book value is the same thing as net worth: all of a company's assets, minus its liabilities. The net worth is (ideally) what the company's value is when not adding a premium for things like future earnings power. Therefore, a company whose market value is below book value would seem to be an obvious bargain.

Q3 2008 Earnings Call Transcript

November 6, 2008, 5:00 pm ET

Q2 2008 Earnings Call

August 7, 2008 5:00 pm ET

Its not so easy finding stocks that could double or more in the next 12 months, but have a look at OpenTV Corp (OPTV),  which provides advanced digital television solutions dedicated to creating and delivering interactive experiences to consumers of digital content worldwide. Its software enables cable, satellite, telecommunications, and digital terrestrial operators to offer enhanced television experiences to their viewers.

The company's software has been integrated in approximately 100 million digital devices around the world, and enables enhanced program guides, video-on-demand, personal video recording, enhanced television, interactive shopping, interactive and addressable advertising, and a range of consumer care and communication applications.

OpenTV Corporation (OPTV)

Q1 2008 Earnings Call Transcript

OpenTV Corp. (OPTV)

Q4 2007 Earnings Call

"In recent months, the credit crunch, the subprime meltdown and the accompanying uncertain economic environment has resulted in significant losses in U.S. stock indexes," it writes, noting small-caps took the biggest hit. The firm believes now is the time to grab cheap, under-appreciated tech stocks.

Cablevision's (CVC) VOOM could be worth more than we thought. Accelerated flat panel HDTV means greater demand for HD content, which should help VOOM grow distribution. Comments that DirecTV and EchoStar may work together on HD indicate joint content investments rather than shared space segment. We would not be surprised if DirecTV and/or Liberty are interested in acquiring all, or part, of Cablevision's interest in these assets.

Comcast's (CMCSA) consumer offering will get even stronger in 2007. At CES we saw a strong set-top box [STB] and device convergence strategy in the Motorola booth where it was showing a new line of STB built to Comcast's specs, which will enable a myriad of new services including networking multiple TVs to one HD DVR. We would also expect Comcast and Sprint to launch dual function Wi-Fi/cellular phones in 2007.

DirecTV's (DTV) pitch at CES was eerily similar to last year's. DirecTV said that it will have over 100 national HD channels by year end, that it would have a VOD service launched in 2007, and highlighted mobile devices, which will interface with its DVR. Much of this was shown in less developed form at CES last year with talk of late 2006 launches. DirecTV also highlighted the launch of a video gaming network.

EchoStar (DISH) highlighted several technological innovations at CES. EchoStar was at CES in force reminding us that it is not just a DBS company, but also a major provider of STB and technology for satellite TV platforms. The DISH Network is fielding a very compelling consumer proposition and announced that it would be launching its own VOD service in 2007. DISH is also the first to commercially launch powerline technology.

Gemstar (GMST) should benefit from the introduction of mobile video service. The proliferation of mobile video services should benefit Gemstar by licensing its wireless IPG. Neither of the premier service providers are currently using Gemstar's IPG, but the executives we talked to about this were circumspect enough to make us believe they are thinking about it. Strong flat panel sales and the launch of broadcast digital services in Europe will serve as a catalyst for CE licensing.

NDS (NNDS) is spurring convergence with its content protection technology. NDS' focus was on CA and DRM for mobile devices. It also showed CA for multiple types of mobile video services, including WiMax, and a low-cost flash memory card with its CA embedded that Disney is using for a child's video player. The telcos will look to provision new services through a residential gateway justifying the recent acquisition of Jungo.

OpenTV's (OPTV) middleware will enable the launch of new services. OpenTV had no actual presence at show, but its STB customers only had good things to say. The transition to digital and flat panel upgrade cycle sets the stage for middleware and application growth. We asked EchoStar about its relationship with OpenTV and were told it had facilitated the Kudelski deal and are looking into several new interactive services.

TiVo (TIVO) was able to showcase its new DVR software for Comcast. TiVo has arguably made technical progress toward transitioning its business model, but it has yet to launch these new services, and their financial contribution remains unclear. TiVo's application for Comcast is admittedly a big improvement, but we feel it is not that revolutionary when compared to next-generation IPGs.

OpenTV (OPTV) shows off High Definition IPTV - OpenTV is probably better known as a satellite and cable middleware provider, but don’t count it out of being part of the future of IPTV. With telephone companies continuing to invest aggressively in this technology, OpenTV has positioned itself as a legitimate solution for the next generation of TV. Through a collaboration with Silicon & Software Systems Ltd., OpenTV was able to demonstrate its middleware running IPTV, using an Amino A13x set top box. Between OpenTV’s innovative advertising solutions and the power of IPTV, OpenTV has positioned itself well to capitalize on the trend away from broadcast and towards interactive TV.

NDS (NNDS) and VBox Team Up To Bring HDTV To The PC - VBox unveiled a partnership with NDS and released their Cat’s Eye PC-TV receiver at this year’s CES. The receiver allows consumers to directly receive and record premium HDTV content on their home PCs. There is no mention of cable card support or price, so it will be interesting to see how legitimate an option this may end up being, but for those who want the advantages of a DVR, but don’t want to give up the platform of a PC, the VBox may be a solution for watching and recording HDTV.

Neuros Demos Open Source DVR - With so much potential functionality, the Neuros OSD is the swiss army knife of the DVR industry. Sick and tired of DRM and proprietary DVR schemes, last year, Neuros turned to the open source community for help creating a Linux based DVR. In only 14 hours, they sold 100 units of an early stage alpha product to a group largely composed of software developers, which has been building it out from there. With upcoming support being built for Skype, placeshifting and portable media storage, the Neuros OSD will be one sick machine when it is launched at $250 per unit, later this year. While it’s likely that its open source nature will prevent HDTV from ever being an option, given its hackable Linux core and the hardcore developer following, I expect that we’ll see the Neuros OSD push the envelope of DVR innovation for years to come.

- We believe 2007 will be a big year for shares of OPTV. OpenTV exits 2006 in strong financial health and enters 2007 with new middleware customers expected to drive 15% to 20% growth. The company has been working closely with Comcast (CMCSA) to develop an interactive advertising platform for the U.S. cable business. We believe OpenTV will announce some sort of deal in the first half of the year that will serve as a positive catalyst for the stock.

- OpenTV is a leading company in a high-growth market, and is the leading provider of set-top box middleware. Digital TV penetration is expected to more than double, reaching 300 million households in the next three years. We estimate cumulative demand for set-top boxes will exceed 440 million units by 2010, and that the cumulative market opportunity for middleware and its related application will exceed $6 billion during this time period.

- We expect OpenTV to be cash flow neutral in 2006 on $100 million in revenue. The 80% of OpenTV's revenue from middleware has about a 45% contribution margin. The remaining 20% is from applications which are still in the development phase. OpenTV's balance sheet is very strong. The company had $67 million in cash and no debt at the end of 3Q06, and it will receive $20 million from Liberty within a year.

Middleware is the software that allows set top boxes and cable operators to talk to each other. While I won’t pretend to understand the intricacies behind the technology, I do know that it typically involves coordinating DRM, electronic guide data and the software interface on a DVR, with the back end cable and IPTV systems that are required to bring television into your home. By bridging the gap between the home users and the cable operator, middleware providers allow cable and IPTV services to seemingless communicate with the signals that you receive to that hot new HDTV DVR that sits on top of your big screen TV.

• We are looking for a sequential jump in revenue. Our 3Q06 revenue estimate of $26 million is ahead of consensus. We think OpenTV will make it, but a minor miss would not be material, least of all because our estimate includes $1 million from Betting Corp., which is likely too high. However, after factoring this in, OpenTV must also show a material improvement from the $24 million in revenue it has reported for three quarters in a row as this would show new deals are coming online.

Story: The television market is undergoing some upheaval, coupled to the changes in the telecom market, and both caused by the advent of the internet. The big change that has occurred, and is continuing, is the unification of all transmissions into one basic protocol method (IP - internet protocol). Differing hardware will all implement or enable that same protocol. Built on top of that are various different functions, enabled via software. That is very different from the past, where each specific communication or transmission method was implemented via unique hardware and methods. The transition is far from complete (really just beginning), but that is where it is going. There are still many different technologies used (think Cable DOCSIS, cell phones, WiMax, Satellite TV, Telecom, etc.).

The reasons for this transition are that 1) we can, 2) system maintenance is easier and cheaper, 3) system utilization and exploitation is more thorough, 4) introduction of new products is faster and cheaper. The transition is hindered by 1) legacy systems, 2) anachronistic regulatory systems, 3) clinging to competitive moats that are drying up, 4) technological difficulties, 5) transition costs.