Gemstar's good numbers still aren't exciting investors.

In the television industry, the time given for a show to establish its audience has dwindled from years to mere weeks, and the same mindset seems to apply to the stock of Gemstar-TV Guide Inc.

Despite a good story line and improving numbers, the Los Angeles-based company can't seem to attract enough committed fans. Gemstar's third-quarter numbers, released last week, show income from continuing operations before taxes of $19.8 million, compared with a loss of $2.1 million for the same quarter last year. Earnings per share came to 4 cents, while analysts expected only 1 cent per share, according to Reuters Estimates. Likewise, the analysts anticipated revenues of $135.9 million; the company delivered $148.9 million.

But the stock price just won't go up. Since the beginning of 2006, the stock has traded between $2.65 and $3.62. It currently sells in the $3.30 range. Meanwhile, of the nine analysts who follow the stock, seven rate it positively, and as a group they project a target price between $4.20 and $5 per share.

Like the industry it covers, Gemstar has had high-profile successes and some behind-the-scenes setbacks. Two of its operating segments--Cable & Satellite and Consumer Electronics--have caught investors' fancy. The Cable & Satellite business distributes program listings in an interactive TV format. Consumer Electronics sells software that allows users to program their VCR or other device to record a specific show.

During the most recent quarter Gemstar grabbed headlines by signing a deal with Yahoo Inc. to distribute TV listings through the Web portal. It also filed a patent infringement lawsuit against competing interactive program guide Moxi. The company caught analysts' attention by re-launching its TVGuide.com Web site.

"We believe TV Guide Online represents a significant growth opportunity for Gemstar-TV Guide given the robust content of the site and the move by consumers towards the use of online information sources," wrote David Kestenbaum, media analyst with Morgan Joseph & Co., in a report dated Sept. 27.

But no matter how well the company's two stars perform, the third segment has investors seeing red. Gemstar's publishing unit, anchored by the namesake magazine, lost $9 million in the most recent quarter. Year-to-date losses are $33.1 million.

Chief Executive Rich Battista sees the magazine as the standard-bearer for the TV Guide brand. This year he reformatted the weekly from digest to full-size magazine.

"We were able to reduce the losses at TV Guide magazine as we continue to invest in this important asset," he said in announcing the third-quarter results. "We're encouraged by positive consumer and industry reactions to the magazine and pleased with the innovative content and advertising initiatives that we have been able to extend beyond the magazine to our other platforms. Hanes, Unilever and Procter & Gamble were among the clients advertising across our businesses this past quarter."

Kestenbaum values the Cable & Satellite division at 10 to 12 times earnings, and puts the worth of the entire segment at $1.3 billion. The Consumer Electronics segment has a multiplier of five to 10, which works out to about $260 million.

In contrast, TV Guide magazine is worth one time sales, or slightly less than $200 million. Kestenbaum expects the magazine to lose about $20 million in 2007. That squares with Gemstar's guidance, issued earlier this year, which predicted "the reformatted TV Guide magazine will begin to contribute positively to the Publishing Segment's adjusted EBITDA in the latter half of 2008."

"In sum, the estimate of the value we attribute across Gemstar-TV Guide's businesses is $1.6 billion in 2006 and $1.9 billion in 2007," Kestenbaum wrote in the report. "When we add our year-end cash and debt estimates and divide by our expected levels for shares outstanding, we generate a 2006 year-end price target of $3.80 and a 2007 year-end price target of $4.40."

BY JOEL RUSSELL

Staff Reporter