Market Report (MVSN)
March 02, 2004 11:27:00 AM ET
Macrovision (MVSN) 18.80 -1.65: Macrovision posted Q4 results after the close yesterday. The provider of copy protection, digital rights management and electronic license management technologies for the music, software and video industries published pro-forma EPS of $0.24 on revenue of $39.866MM (+32.2% Y/Y) vs. Reuters Research consensus at $0.23 on $34.76MM.
Gross margin increased 77 bps Y/Y to 90.7%.
Operating margin, excluding extraordinary items, increased 228 bps Y/Y to 44.2%.
Guided for Q1 pro-forma EPS of $0.13-0.14 on revenue of $31M-$32M (+10.5-14.1% Y/Y) vs. consensus at $0.18 on $31.40MM.
Management projected C04 pro-forma EPS of $0.78-0.80 on $145M-$150MM (+13.0-16.9% Y/Y) vs. consensus at $0.84 on $136.81MM. EPS guidance reflects accelerated investments in digital rights solutions and spend in support of upcoming product releases. Excluding these investments, EPS would have come in at or above $0.85. Gross margin is expected to come in at 91-93%. Guided for operating margin of 38-40%.
Shares are, based on our inverted EVA / DCF model, priced for sustained upper 20% revenue growth assuming flat operating margin and firm balance sheet management.
Large potential market opportunities:
Music: the IFPI (International Federation of Phonographic Industries) estimates that the recording industry loses over $4B in revenue annually due to piracy, counterfeiting and bootlegging, that approximately 40% of recordings sold worldwide are unauthorized copies, and there are approximately 200K Web and FTP sites hosting or linking to approximately 100MM unauthorized recorded music files.
Video protection: the MPAA (Motion Picture Association of America) estimates that the U.S. motion picture industry loses over $3B in revenue each year due to packaged media piracy.
The International Intellectual Property Alliance estimates that companies lose $20-22B in annual revenue due to piracy around the world.
But high penetration and selective adoption clouds revenue outlook and limits upside. MVSN's video copy protection technology is already in 100% of DVD players and 90% of set-top boxes worldwide, and over 40% of MPAA members use MVSN technology. While only approximately 50MM of the 1B music CDs produced annually are protected, market opportunity is limited as companies are selectively protecting products.
We would wait for a 25-30% pull-back before initiating a minor position.--Ping Yu, Briefing.com
