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Macrovision buys Gemstar-TV Guide

Companies' stocks fall after $2.8 billion deal

Macrovision, a Silicon Valley maker of digital rights management systems used by many Hollywood studios, is paying $2.8 billion in cash and stock to acquire Gemstar-TV Guide.

The company said it plans to expand on Gemstar-TV Guide’s efforts to leverage its traditional print brand in the cable-box and digital realms. Macrovision security software and Gemstar-TV Guide’s programming guide could be combined to create an immersive viewer experience allowing them to access information about TV shows as well as personal photos and music playlists.

Unlike in the typical merger scenario, shares in both companies got hammered on the news. Macrovision stock closed down 21.4% Friday at $20.44. Gemstar-TV Guide stock shed 16.6% of its value at $4.99 a share.

News Corp., which owns 41% of Gemstar, said it would vote in favor of the deal.

As to the fate of the print magazine, execs at Macrovision said only that they are reviewing all of the assets. Chief exec Fred Amoroso conceded in a conference call with analysts that he didn’t know much about publishing.

Many observers and Wall Street analysts predicted Macrovision will try to spin off TV Guide magazine, but others said it could be the end of the line for the 54-year-old title.

TV Guide, which underwent a dramatic redesign in 2005 to become a tabloid-size title with punchier editorial content, has struggled amid falling ad revenue and circulation. The company forecasts a loss of at least $30 million in 2007.

Gemstar said last summer that it was “exploring strategic alternatives,” corporate-speak that often signals a sale.

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