Gemstar Turnaround Gains Momentum with Comcast Deal and Settled Suits

The salvaging of Gemstar-TV Guide kicked in thoroughly this week, with a $250 million technology co-development deal with Comcast, and the settlement of a number of class-action lawsuits.

Gemstar eased fears among multichannel distributors that News Corp would make a lever of its interactive program guide (IPG) technology by striking a deal with Comcast to develop program guides, based on Gemstar's technology, for the MSO and the rest of the industry. The venture will be majority owned by Comcast, while Gemstar will retain the right to distribute resulting products to other cable companies. The agreement netted Gemstar a one-time, $250 million cash payment from Comcast.

Gemstar CEO Jeff Shell told Reuters that the deal should ease concern among cable operators worried that News Corp.- Gemstar's largest shareholder -- would jack up the price of using Gemstar's IPG technology, which many have already incorporated into their systems. Such a move would raise the competitive stakes between cable operators and DBS provider such as DirecTV, which is also now under the control of News Corp.

The agreement allows Comcast to use Gemstar's technology and the TV Guide brand on its IPGs, and includes carriage of the TV Guide Channel, TV Guide on Demand and the TVG Network (a horse-racing channel), on Comcast systems.

Soon after the announcement of the Comcast deal, Gemstar said it reached an agreement to settle several class-action suits brought by shareholders in the wake of accounting misdeeds that led to charges against former top executives.

Gemstar said it would pay $42.5 million in cash to class-action participants and issue 4.1 million shares of stock, worth $25 million at the time of the agreement. The number of shares will increase if share price falls below $6.09 at distribution, the company said. Gemstar will report a pre-tax charge of $67.5 million for the settlement in its Q4 results, to be issued March 2.