Gemstar TV Guide International 10Q 2007 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-24218

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware

95-4782077

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6922 Hollywood Boulevard, 12th Floor, Los Angeles, California 90028

(Address of principal executive offices including zip code)

(323) 817-4600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes¨ No x

As of October 26, 2007, there were 429,055,753 shares outstanding of the registrant’s Common Stock, par value $0.01 per share.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006	1

	Condensed Consolidated Statements of Income—Unaudited for the three months and nine months ended September 30, 2007 and 2006	2

	Condensed Consolidated Statements of Stockholders’ Equity—Unaudited for the three months and nine months ended September 30, 2007 and 2006	3

	Condensed Consolidated Statements of Cash Flows—Unaudited for the nine months ended September 30, 2007 and 2006	4

	Notes to Condensed Consolidated Financial Statements—Unaudited	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 6.	Exhibits	31

Signature		32

Items 2, 3, 4 and 5 of PART II are not applicable and have been omitted.

PART I—FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	September 30, 2007			December 31, 2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	458,895		$	464,637
Restricted cash		32,409			31,814
Marketable securities		87,807			48,938
Receivables, net		80,320			73,786
Deferred tax assets, net		33,724			13,491
Current income taxes receivable		65,069			49,588
Other current assets		22,728			18,329

Total current assets		780,952			700,583
Property and equipment, net		67,929			68,182
Indefinite-lived intangible assets		62,140			61,921
Finite-lived intangible assets, net		85,715			92,340
Goodwill		262,591			260,503
Income taxes receivable		10,873			22,731
Deferred tax assets, long-term, net		73,325			3,141
Other assets		11,266			14,336

	$	1,354,791		$	1,223,737

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,918		$	32,392
Accrued liabilities		86,092			104,259
Current portion of capital lease obligations		642			605
Current portion of deferred revenue		127,669			128,516

Total current liabilities		237,321			265,772
Long-term capital lease obligations, less current portion		11,625			12,111
Deferred revenue, less current portion		337,988			368,950
Other liabilities		71,501			123,779
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.01 per share		—			—
Common stock, par value $0.01 per share		4,337			4,337
Additional paid-in capital		8,454,423			8,456,117
Accumulated deficit		(7,715,672	)		(7,950,421	)
Accumulated other comprehensive income, net of tax		3,075			665
Treasury stock, at cost		(49,807	)		(57,573	)

Total stockholders’ equity		696,356			453,125

	$	1,354,791		$	1,223,737

See accompanying Notes to Condensed Consolidated Financial Statements.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME—UNAUDITED

(In thousands, except per share data)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2007			2006		2007			2006
Revenues	$	159,551		$	148,947	$	471,894		$	426,268
Expenses:
Costs of revenues		54,888			54,273		150,564			167,656
Selling, general and administrative		88,911			73,373		220,089			197,844
Depreciation and amortization		10,752			8,420		29,398			24,987

Operating income		5,000			12,881		71,843			35,781
Other income:
Interest income, net		6,556			6,788		19,180			18,566
Other income, net		276			86		469			337

Income from continuing operations before income taxes		11,832			19,755		91,492			54,684
Income tax (benefit) expense		(111,360	)		2,303		(83,238	)		14,031

Income from continuing operations		123,192			17,452		174,730			40,653

Discontinued operations:
Income from discontinued operations before income taxes		—			—		5,858			—
Income tax expense		—			—		2,217			—

Income from discontinued operations		—			—		3,641			—

Net income	$	123,192		$	17,452	$	178,371		$	40,653

Basic and diluted per share:
Income from continuing operations	$	0.29		$	0.04	$	0.41		$	0.10
Income from discontinued operations		0.00			0.00		0.01			0.00

Net income	$	0.29		$	0.04	$	0.42		$	0.10

Weighted average shares outstanding:
Basic		428,404			426,210		428,155			426,190
Diluted		431,222			426,262		429,438			426,244

See accompanying Notes to Condensed Consolidated Financial Statements.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—UNAUDITED

(In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Balance at beginning of period	$	568,409	$	397,854	$	453,125	$	373,206
Net income		123,192		17,452		178,371		40,653
Other comprehensive income		1,398		60		2,410		551

Comprehensive income		124,590		17,512		180,781		41,204
Cumulative effect of an accounting change		—		—		56,378		—
Other, principally shares issued pursuant to stock option plans, including tax benefit, and stock compensation expense		3,357		709		6,072		1,665

Balance at end of period	$	696,356	$	416,075	$	696,356	$	416,075

See accompanying Notes to Condensed Consolidated Financial Statements.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—UNAUDITED

(In thousands)


	Nine Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net income	$	178,371		$	40,653
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29,398			24,987
Deferred income taxes		(90,417	)		6,631
Stock compensation expense		2,720			1,463
Other		3,510			2,834
Changes in operating assets and liabilities:
Restricted cash		(595	)		7,868
Receivables		394			448
Income taxes, net		(3,623	)		51,410
Other assets		(2,595	)		11,033
Accounts payable, accrued liabilities and other liabilities		(27,631	)		(27,276	)
Deferred revenue		(31,809	)		(51,527	)

Net cash provided by operating activities		57,723			68,524

Cash flows from investing activities:
Acquisition of Aptiv, net of acquired cash of $4,466		(11,814	)		—
Other acquisitions and investments		(2,681	)		(3,241	)
Purchases of marketable securities		(178,783	)		(81,258	)
Maturities of marketable securities		141,574			34,541
Proceeds from sale of assets		10			8
Additions to property and equipment		(15,675	)		(15,807	)

Net cash used in investing activities		(67,369	)		(65,757	)

Cash flows from financing activities:
Repayment of capital lease obligations		(449	)		(414	)
Proceeds and excess tax benefits from exercise of stock options		3,353			123

Net cash provided by (used in) financing activities		2,904			(291	)

Effect of exchange rate changes on cash and cash equivalents		1,000			133

Net (decrease) increase in cash and cash equivalents		(5,742	)		2,609
Cash and cash equivalents at beginning of period		464,637			465,131

Cash and cash equivalents at end of period	$	458,895		$	467,740

See accompanying Notes to Condensed Consolidated Financial Statements.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

(1) Organization and Basis of Presentation

Gemstar-TV Guide International, Inc., a Delaware corporation (“Gemstar” or the “Company”), is a media, entertainment and technology company that develops, licenses, markets and distributes products and services targeted at the video guidance and entertainment needs of consumers worldwide.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 and the interim period reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 and its Quarterly Report on Form 10-Q for the quarters ended June 30, 2007 and March 31, 2007.

The accompanying interim financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated financial position of the Company and its results of operations and cash flows for the periods presented. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year.

In 2007, in conjunction with implementing a new centralized financial system, the Company changed its calendar to a 52-53 week fiscal year ending on the Sunday nearest to December 31. Each of the Company’s fiscal quarters also now end on the Sunday nearest to the end of the calendar quarter. Prior to 2007, the Company maintained a calendar fiscal year ending on December 31, except for TV Guide magazine, which maintained a 52-53 week fiscal year ending on the Sunday nearest to December 31. This change in fiscal year end did not have a material effect on the comparability of the Company’s condensed consolidated statements of income for the three months and nine months ended September 30, 2007 and 2006.

Certain financial statement items for the prior period have been reclassified to conform to the 2007 presentation.

(2) Acquisitions, Dispositions and Other Significant Events

Aptiv

On March 29, 2007, the Company acquired all of the outstanding shares of privately held PDT Holdings, Inc., which owns 100% of the outstanding shares of Aptiv Digital, Inc. (collectively “Aptiv”) for approximately $16.3 million in cash, after taking into account certain disbursements made at closing, customary working capital adjustments and transaction costs. Aptiv is a provider of software solutions for television set-top boxes.

SNG Businesses

On March 1, 2004, the Company entered into an agreement to sell substantially all of the operating assets and certain liabilities of the Company’s SuperStar/Netlink Group LLC, UVTV distribution services and SpaceCom Systems businesses (collectively the “SNG Businesses”). Costs associated with this disposal were estimated at $5.9 million, and consisted principally of contractual acceleration of certain liabilities, employee-related transfer costs necessitated by the deal structure (asset purchase), and other transaction costs. As of December 31, 2006, $4.9 million of these costs remained unpaid. The Company paid or reversed all of these accrued liabilities in the three months ended March 31, 2007. The Company also reversed certain accrued liabilities and collected certain previously reserved for receivables related to the operations of the SNG businesses prior to the sale during that same quarter. These amounts are recorded in discontinued operations in the Company’s condensed consolidated statements of income.

Resolution of Leung Arbitration

Under a court order issued on May 9, 2003 pursuant to Section 1103 of the Sarbanes-Oxley Act, the Company has been required to maintain certain funds (the “1103 funds”) originally totaling approximately $37.0 million in segregated, interest-bearing accounts. The order prevents the Company from paying any portion of the 1103 funds, which were originally set aside by the Company for payment to a former chief executive officer, Henry C. Yuen, and a former chief financial officer, Elsie Leung, in connection with the Company’s November 2002 management and corporate governance restructuring, absent further order of the court.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

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(2) Acquisitions, Dispositions and Other Significant Events (continued)

On June 13, 2006, the Company entered into a settlement and release agreement with Ms. Leung. Pursuant to the settlement agreement, Ms. Leung specifically released her claims for reimbursement of legal fees, any claims that she has against the Company’s directors’ and officers’ insurance carriers, and any future claims for advancement of legal expenses or indemnification. Ms. Leung also released her claims to approximately $8.4 million of the Section 1103 funds.

As a result of the settlement, the liability the Company carried on its balance sheet for restructuring payments and related interest (which were part of the 1103 funds) and accrued payroll taxes and legal expenses, totaling approximately $9.2 million, were extinguished in the Company’s fiscal quarter ended June 30, 2006. Of this $9.2 million liability, $8.9 million was recorded as a reduction in Selling, General and Administrative expenses within Cross Platform Costs and $0.3 million as interest income. Additionally, the Company reclassified approximately $8.4 million of restricted cash on its balance sheet to cash and cash equivalents as of June 30, 2006.

(3) Litigation and Other Contingencies

The following material developments in the Company’s legal proceedings occurred in the quarter ended September 30, 2007. The Company intends to vigorously defend or prosecute all pending legal matters unless specified otherwise below.

Patent and Anti-Trust Litigation

SuperGuide Corporation v. DirecTV Enterprises, Inc., et al., in the United States District Court for the Western District of North Carolina. On March 23, 2001, the Company’s subsidiary, Gemstar Development Corporation (“GDC”), was added as a third-party defendant in this case. Plaintiff SuperGuide Corporation’s (“SuperGuide”) complaint alleged patent infringement by DirecTV, EchoStar, Thomson Consumer Electronics, and Hughes Electronics (collectively, the “Defendants”) with respect to three patents (the “SuperGuide Patents”) owned by SuperGuide but licensed to GDC. After being added as a party, GDC brought claims (i) against SuperGuide for declaratory relief and for breach of contract relating to a 1993 license agreement between SuperGuide and GDC; and (ii) against EchoStar for infringing the SuperGuide Patents within GDC’s defined fields of use. (Pursuant to certain licensing and settlement agreements between GDC and EchoStar, the claims between GDC and EchoStar were dismissed with prejudice.) During March 2007, the Court held a bench trial on the licensing issues in the case. On July 20, 2007, the Court decided the licensing issues in favor of SuperGuide. In that ruling, GDC’s cross-claims against SuperGuide for declaratory judgment and breach of contract were dismissed with prejudice.

In connection with this case, the Company agreed in 2004 to reimburse EchoStar for legal expenses and liabilities in an aggregate amount not to exceed $3.5 million. In addition, Thomson has asserted claims for indemnification from the Company and made a demand that the Company defend and indemnify Thomson against SuperGuide’s claims. The Company has denied Thomson’s claims for indemnity. DirecTV has also asserted a potential right to defense and indemnification from the Company with respect to the SuperGuide litigation described herein, and the Company has denied DirecTV’s claims for indemnity.

ODS Technologies, L.P. v. Magna Entertainment Corp., HRTV, Inc. and XpressBet, Inc., in the United States District Court for the Central District of California. On May 17, 2007, the Company’s subsidiary ODS Technologies, L.P. (“ODS,” which does business as TVG Network) filed a patent infringement complaint against Magna Entertainment Corp. (“MEC”), HRTV, LLC (“HRTV”) and XpressBet, Inc. (“XpressBet”) in the United States District Court for the Central District of California. ODS asserts that defendants infringe two of its patents related to interactive off-track wagering systems, U.S. Patent No. 6,089,981 and U.S. Patent No. 6,554,709. The complaint seeks injunctive relief prohibiting further infringement by defendants as well as damages, including damages attributable to defendants’ allegedly willful infringement. On July 9, 2007 MEC, its wholly owned subsidiary XpressBet, and its 50%-owned subsidiary HRTV filed an answer and counterclaims seeking declaratory judgments that they do not infringe the subject patents, that the subject patents are invalid, and that the subject patents are unenforceable. On August 29, 2007, MEC filed an amended answer and counterclaims providing additional detail with respect to its affirmative defenses. On September 18, 2007, the Company replied to MEC’s amended answer, denying the counterclaims regarding non-infringement, invalidity, and unenforceability.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

(3) Litigation and Other Contingencies (continued)

Other Litigation

Henry Yuen v. Gemstar-TV Guide International, Inc., American Arbitration Association, New York. On May 30, 2003, Mr. Yuen, commenced an arbitration proceeding against the Company to contest his April 18, 2003 termination for cause, seeking monetary damages, interest, attorneys’ fees and costs. The Company filed a consolidated response and counterclaim alleging breach of representations and warranties under agreements entered into in connection with the Company’s November 2002 management and corporate governance restructuring, seeking monetary damages and other relief.

On January 22, 2007 the panel issued a partial final award in favor of the Company, ruling against Mr. Yuen on his wrongful termination claims, and finding Mr. Yuen liable to the Company for $93.6 million in damages for his breach of certain representations and warranties made to the Company. On June 19, 2007, the panel of arbitrators issued their final award, incorporating the previous award and awarding the Company an additional $20.9 million in attorney fees and interest. The Company also prevailed in the arbitration with respect to the Patent Rights Agreement, which remains in effect until 2010; and the Company may offset amounts owed to Mr. Yuen under that agreement against the approximately $114.5 million total damages and interest awarded to the Company. Accordingly, the liability the Company carried on its balance sheet as of December 31, 2006 for the Patent Rights Agreement of approximately $10.7 million was reversed in the Company’s financial statements during the fiscal quarter ended March 31, 2007. The panel’s final award established the amount of the offset to be $25.7 million including royalties under the Patent Rights Agreement plus interest. Additionally, as stated in the panel’s January 2007 ruling, Mr. Yuen is not entitled to any portion of the 1103 funds. Consequently, the net final arbitration award in favor of the Company entitles it to the approximately $120.1 million (approximately $31.3 million in 1103 funds, plus approximately $88.8 million in damages and interest). On June 21, 2007, the Company initiated proceedings in the Supreme Court of the State of New York, captionedIn the Matter of the Petition of Gemstar – TV Guide International, Inc. v. Henry C. Yuen, to have the arbitration award confirmed by the Court. On July 9, 2007 Mr. Yuen filed a motion (i) to dismiss the Company’s petition to have the arbitration award confirmed, (ii) to vacate portions of the award concerning damages owed to the Company, and (iii) to confirm the portion of the award pertaining to amounts owing to Mr. Yuen under the Patent Rights Agreement. On July 16, 2007, the Company filed its reply opposing Mr. Yuen’s motion.

In addition to the items listed above, the Company is party to various legal actions, claims and proceedings as set forth in its Form 10-K for the year ended December 31, 2006, its Form 10-Q for the quarter ended March 31, 2007, its Form 10-Q for the quarter ended June 30, 2007, as well as other actions, claims and proceedings incidental to its business. The Company has established loss provisions only for matters in which losses are probable and can be reasonably estimated. Some of the matters pending against the Company involve potential compensatory, punitive or treble damage claims, or sanctions, that if granted, could require the Company to pay damages or make other expenditures in amounts that could have a material adverse effect on the Company’s financial position or results of operations. At this time management has not reached a determination that any of the matters listed above or the Company’s other litigation are expected to result in liabilities that will have a material adverse effect on the Company’s financial position or results of operations.

(4) Guarantees

The Company guarantees from time to time the obligations and financial responsibilities of different subsidiaries incidental to their respective businesses.

The Company provides indemnification of varying scopes and amounts to certain of its licensees against claims made by third parties arising out of the incorporation of the Company’s products, intellectual property, services and/or technologies into the licensee’s products and services, provided the licensee is not in violation of the terms and conditions of the agreement and/or additional performance or other requirements for such indemnification. The Company’s indemnification obligations are typically limited to the cumulative amount paid to the Company by the licensee under the license agreement. Some license agreements, including those with our largest multiple system operators (“MSOs”) and digital broadcast satellite (“DBS”) providers, do not specify a limit on amounts that may be payable under the indemnity arrangements. In 2005, the Company received notice from DirecTV, a large DBS licensee of the Company, regarding a potential claim for indemnification in connection with a patent infringement claim filed against DirecTV by Finisar Corporation (“Finisar”). In 2005, Comcast, a large MSO licensee of the Company, put the Company on notice of a potential claim for indemnity in connection with a potential patent infringement claim against Comcast by Finisar. Comcast commenced a declaratory relief action against Finisar in 2006, seeking a ruling that it does not infringe the Finisar patent at issue in the DirecTV case.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

(4) Guarantees (continued)

In connection with the Company’s sale of its SkyMall in-flight catalog business in 2005, the Company has indemnified SkyMall and certain of its affiliates for various matters that are typical for transactions of this type, subject in certain instances to a negotiated basket and/or cap.

In conjunction with the assignment of a lease in 2004 held by TV Guide Interactive, Inc. (“Interactive”) to Guideworks, LLC, a 49% owned joint venture (“Guideworks”), Interactive and the Company’s co-venturer jointly and severally guaranteed the obligations of Guideworks under the lease. Interactive’s guaranty obligations continue as long as the Company is a member of Guideworks.

The Company provides indemnification to its officers and directors pursuant to the Company’s Certificate of Incorporation and By-Laws and various agreements. Therefore, the Company maintains directors and officers (“D&O”) liability insurance with respect to liabilities arising out of certain matters, including matters arising under securities laws. This insurance is subject to limitations, conditions and deductibles set forth in the insurance policies.

(5) Income Taxes

The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes,as amended (“Interpretation 48”), on January 1, 2007. Interpretation 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. As a result of the implementation of Interpretation 48, the Company recognized a $56.4 million decrease in the liability for tax contingencies, which was accounted for as a decrease to the January 1, 2007 balance of accumulated deficit. After the date of adoption, the Company had a remaining liability of $24.5 million recorded for tax contingencies, including penalties and interest of $7.9 million. This liability is recorded in other liabilities on the Company’s condensed consolidated balance sheet. If these liabilities are reversed in future periods it would favorably affect the Company’s effective tax rate.

The Company recognizes penalties and interest accrued related to unrecognized benefits as a component of income tax expense in the condensed consolidated statements of income. The Company recorded expenses of $0.4 million and $1.2 million related to interest and penalties during the three months ended September 30, 2007 and 2006, respectively, and a benefit of $0.1 million and expenses of $1.0 million for the nine months ended September 30, 2007 and 2006, respectively.

For the three months and nine months ended September 30, 2007, the Company’s effective tax rate benefited significantly from the reversal of a valuation allowance that had been recorded against the Company’s deferred tax assets. The Company now has a history of generating, and accurately forecasting, pre-tax book income. The 2008 annual budget and long-range plan process, which coincided with the preparation and review of the Company’s interim financial statements for the third quarter of 2007, projects adequate future taxable income to utilize its deferred tax assets. These factors make the realization of the Company’s deferred tax assets more likely than not and therefore, in accordance with Statement of Financial Accounting Standards No. 109,Accounting for Income Taxes, a valuation allowance is no longer necessary. For the three months ended September 30, 2007, the Company reversed the $115 million valuation allowance balance previously recorded as of June 30, 2007. For the nine months ended September 30, 2007, the impact of reversing the valuation allowance recorded as of December 31, 2006, was $109 million, as $6 million of the $115 million had been recorded in the first two quarters of 2007.

For the three and nine months ended September 30, 2006, the provision for income taxes as a percentage of income from continuing operations before income taxes was 11.7% and 25.7%, respectively. The Company’s effective tax rate benefited in 2006 from the reversal of a deferred tax asset and its related valuation allowance for amounts the Company had previously accrued for Ms. Leung (See Note 2).

The Company or certain of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The Internal Revenue Service (IRS) has concluded its examination of the Company’s U.S. federal income tax returns for years prior to 2004. The IRS is currently examining the Company’s 2004 U.S. income tax return. This examination is anticipated to be completed by the end of 2007. The Company is no longer subject to state income tax examinations for years prior to 1999. The state of Oklahoma is currently examining the Company’s state income tax returns for tax years 1999 through 2004.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

(6) Related Party Transactions

As of September 30, 2007, News Corporation beneficially owned approximately 41% of the Company’s outstanding common stock and four of the Company’s directors are also officers of News Corporation.

The Company charged entities controlled by News Corporation $3.8 million and $3.1 million for advertising and other services during the three months ended September 30, 2007 and 2006, respectively and $8.0 million and $9.3 million for the nine months ended September 30, 2007 and 2006, respectively. During those same periods, the Company acquired programming from News Corporation-controlled entities of $0.2 million for each of the three months ended September 30, 2007 and 2006, and $1.1 million and $1.0 million for the nine months ended September 30, 2007 and 2006, respectively.

The Company reimburses News Corporation for facilities and other general and administrative costs incurred on the Company’s behalf. Expenses associated with these costs approximated $1.1 million and $1.0 million for the three months ended September 30, 2007 and 2006, respectively, and $3.2 million for each of the nine months ended September 30, 2007 and 2006.

During the third quarter of 2004, the Company entered into a long-term capital sublease with News Corporation’s subsidiary Fox Entertainment Group, Inc. (“Fox”) for a transponder to be used in its Media Networks and Guidance Technology and Solutions segments operations. Related amortization and interest expense recognized under this capital sublease was $0.5 million for each of the three month periods ended September 30, 2007 and 2006 and $1.4 million and $1.5 million for the nine months ended September 30, 2007 and 2006, respectively. The total obligation under this capital lease was $12.3 million at September 30, 2007 and $12.7 million at December 31, 2006.

The Company transmits interactive program guide (“IPG”) data in the vertical blanking interval of television broadcast stations owned and operated by Fox. In exchange, the affiliate’s stations are entitled to a preferred position on the IPG in their designated market areas. In addition, the Company purchases paper through a paper procurement arrangement with News Corporation at negotiated prices with paper suppliers based on the combined paper requirements of the two organizations.

As of September 30, 2007 and December 31, 2006, the Company had receivables due from News Corporation-controlled entities totaling $2.4 million for each of the respective periods and payables due to News Corporation-controlled entities totaling $0.1 million and $0.3 million, respectively.

The Company has included in the amounts discussed above transactions with News Corporation and all known entities in which News Corporation has an interest greater than 50%. In addition, the Company has material transactions with entities in which News Corporation owns, directly or indirectly, 50% or less.

(7) Segment Information

The Company reports segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding the allocation of resources to the business units. The Company presents its business units to its chief operating decision maker in three reportable segments. In addition, the Company also has Cross Platform Costs which includes certain company-wide expenditures. Segment information for the prior periods has been reclassified to conform to the current presentation.

The Guidance Technology and Solutions Segment consists primarily of (i) IPG Patent Licensing to third party guide developers such as multi-channel video service (cable, satellite and IPTV) providers, consumer electronics (“CE”) manufacturers, set-top box manufacturers, interactive television software providers and program guide providers in the online, personal computer and mobile phone businesses, (ii) Company-developed IPG Products and Services provided for multi-channel video service providers and CE manufacturers, and (iii) video recording technology currently marketed under the VCR Plus+ brand in North America and under other brands in Europe and Japan (collectively referred to as “VCR Plus+”). This segment also includes TV Guide Data Solutions, a data collection and distribution business that gathers and distributes program listings and channel lineups, and TV Guide Mobile Entertainment.

The Media Networks Segment consists of the Company’s cable television and online networks and includes the following business units: TV Guide Network, TVG Network, Online Networks, TV Guide Broadband and TV Guide SPOT.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

(7) Segment Information (continued)

The Publishing Segment consists primarily of TV Guide magazine.

Cross Platform Costs includes costs related to the Company’s product development and technology group and corporate marketing expenditures, as well as corporate management, finance, legal, information technology, human resources and related expenses such as certain litigation and insurance costs. The product development and technology group focuses on developing next generation guidance products and services. Corporate marketing is primarily focused on cross-platform marketing initiatives to drive greater usage of our products and elevate our brand.

The Company’s chief operating decision maker uses an adjusted EBITDA (as defined below) measurement to evaluate the performance of, and allocate resources to, the business units. Intersegment revenues and expenses have been eliminated from segment financial information as transactions between reportable segments are excluded from the measure of segment profit and loss when reviewed by the Company’s chief operating decision maker. Balance sheets of the reportable segments are not used by the chief operating decision maker to allocate resources or assess performance of the businesses.

Segment information for the three months and nine months ended September 30, 2007 and 2006 is presented and reconciled to consolidated income from continuing operations before income taxes as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Guidance Technology & Solutions:
Revenues	$	68,337		$	57,137		$	214,887		$	167,686
Operating expenses (1)		24,737			22,103			70,614			61,131

Adjusted EBITDA(2)		43,600			35,034			144,273			106,555

Media Networks:
Revenues		50,565			48,432			147,654			145,269
Operating Expenses(1)		47,644			37,401			124,432			115,624

Adjusted EBITDA(2)		2,921			11,031			23,222			29,645

Publishing:
Revenues		40,649			43,378			109,353			113,313
Operating Expenses(1)		42,854			50,711			118,671			144,126

Adjusted EBITDA(2)		(2,205	)		(7,333	)		(9,318	)		(30,813	)

Cross Platform Costs:
Operating Expenses(1)		27,216			16,804			54,216			43,156

Adjusted EBITDA(2)		(27,216	)		(16,804	)		(54,216	)		(43,156	)

Consolidated:
Revenues		159,551			148,947			471,894			426,268
Operating Expenses (1)		142,451			127,019			367,933			364,037

Adjusted EBITDA(2)		17,100			21,928			103,961			62,231
Stock compensation		(1,348	)		(627	)		(2,720	)		(1,463	)
Depreciation and amortization		(10,752	)		(8,420	)		(29,398	)		(24,987	)

Operating income		5,000			12,881			71,843			35,781
Interest income, net		6,556			6,788			19,180			18,566
Other income, net		276			86			469			337

Income from continuing operations before income taxes	$	11,832		$	19,755		$	91,492		$	54,684

(1)	Operating expenses means operating expenses, excluding stock compensation, depreciation and amortization and impairment of intangible assets.

(2)

Adjusted EBITDA is defined as operating income (loss), excluding stock compensation, depreciation and amortization and impairment of intangible assets. The Company believes adjusted EBITDA to be relevant and useful information as adjusted EBITDA is the primary measure used by our chief operating decision maker to evaluate the performance of and make decisions about resource allocation to the segments.

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

(8) Stock-Based Employee Compensation

The per share weighted-average fair value of stock options granted during the nine months ended September 30, 2007 and 2006 was $2.24 and $1.73, respectively. The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	Nine Months Ended September 30,
	2007		2006
Risk-free interest rate	4.6	%	4.6	%
Expected volatility	44.6	%	49.4	%
Expected life (years)	6.3		6.3
Expected dividend yield	—		—

The Company’s volatility estimate was based on the Company’s historical daily volatility from April 1, 2003 (the day after the Company restated its 2002 and prior financial results) as well as the implied volatility of the Company’s exchange traded options. The estimated expected term was determined based on the formula described in Staff Accounting Bulletin No. 107 for estimating the expected term of “plain vanilla” options.

The following table summarizes information about the Company’s stock option transactions:


	Shares (in thousands)		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2006	28,510		$	6.82	3.8
Granted	5,507			4.45
Exercised	(790	)		3.59
Forfeited/Expired	(1,189	)		7.00

Outstanding at September 30, 2007	32,038		$	6.48	4.1	$	61,372

Vested and expected to vest in future periods at September 30, 2007	30,145		$	6.64	3.8	$	55,725

Vested and exercisable at September 30, 2007	23,080		$	7.47	2.2	$	34,358

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2007 was $1.5 million. As of September 30, 2007, $13.3 million of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of 3.2 years.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2007 and all other filings, including reports on Form 10-Q and Form 8-K, filed with the SEC after such date and through the date of this report. This MD&A should also be read in conjunction with the condensed consolidated financial statements and notes that appear elsewhere in this report.

Overview

Gemstar-TV Guide International, Inc. (“Gemstar” or the “Company”) is a media, entertainment and technology company that develops, licenses, markets and distributes products and services targeted at the video guidance and entertainment needs of consumers worldwide.

During the first quarter of 2007, the Company reorganized the presentation of its business units to its chief operating decision maker into three reportable segments – Guidance Technology and Solutions, Media Networks and Publishing. In addition, the Company also has Cross Platform Costs which includes certain company-wide expenditures.

Guidance Technology and Solutions.The Guidance Technology and Solutions Segment consists primarily of (i) IPG Patent Licensing to third party guide developers such as multi-channel video service (cable, satellite and IPTV) providers, consumer electronics (“CE”) manufacturers, set-top box manufacturers, interactive television software providers and program guide providers in the online, personal computer and mobile phone businesses, (ii) Company-developed IPG Products and Services provided for multi-channel video service providers and CE manufacturers, and (iii) video recording technology currently marketed under the VCR Plus+ brand in North America and under other brands in Europe and Japan (collectively referred to as “VCR Plus+”). For the three and nine months ended September 30, 2007, the Guidance Technology and Solutions Segment generated approximately 43% and 46% of our total revenue, respectively. This segment also includes TV Guide Data Solutions, a data collection and distribution business that gathers and distributes program listings and channel lineups, and TV Guide Mobile Entertainment, which creates and distributes made-for-mobile branded content as well as applications that run on mobile phones, or are accessible via WAP, which allow consumers to search TV listings for home-based programming.

On March 29, 2007, the Company acquired Aptiv Digital, Inc. (“Aptiv”) for approximately $16.3 million in cash, after taking into account certain disbursements made at closing, customary working capital adjustments and transaction costs. Aptiv is a provider of software solutions for television set-top boxes. The operating results of Aptiv subsequent to the date of acquisition are reported in the Company’s Guidance Technology and Solutions Segment, under IPG Products and Services.

Media Networks.The Media Networks Segment includes the operations of TV Guide Network, TVG Network (“TVG”), Online Networks, TV Guide Broadband and TV Guide SPOT. For the three and nine months ended September 30, 2007, the Media Networks Segment generated approximately 32% and 31% of our total revenue, respectively. The Media Networks Segment generates revenue primarily from advertising fees received by TV Guide Network, TVG and Online Networks, affiliate fees received by TV Guide Network, and licensing and wagering fees received by TVG.

TV Guide Network (formerly known as TV Guide Channel) is an analog and digital channel distributed, as of September 30, 2007, to 83.5 million households as measured by Nielsen Media Research. TV Guide Network offers entertainment and television guidance-related programming as well as localized program listings and descriptions primarily in the United States. We are currently evolving TV Guide Network into an entertainment destination that features high-quality original programming relating to the world of television, entertainment news and celebrities. We are now producing approximately 14 hours per week of new and original content from our studio in Hollywood, California and through third party producers. TV Guide Network generates approximately 58% of its advertising revenue from national advertising that airs during programming hours from 11:00 AM to 2:00 AM and 42% from long-form infomercials, which run daily from 2:00 AM to 11:00 AM.

TVG combines live television horse racing from many of the premier horse racetracks in the United States and other countries with the convenience of wagering from home via telephone, online (www.tvg.com), interactive set-top box and WAP/Internet enabled mobile devices, from certain states. TVG also receives licensing revenue from other advance deposit wagering providers. As of September 30, 2007, TVG was distributed to approximately 28.1 million U.S. cable or satellite households. TVG’s programming is also available to over 11 million households in the United Kingdom and Ireland via the U.K.’s leading horseracing network, At the Races, and more than 8 million households in the United Arab Emirates, Saudi Arabia and other markets in that region via the Dubai Sports Channel. In addition, TVG is also carried on Fox Sports Net in approximately 6 million southern California homes for two hours or more, five days a week.

Online Networks is comprised of five entertainment websites, led by tvguide.com, which feature a combination of entertainment news, video programming, celebrity information, localized channel listings, editorial guidance, community features and search features. The tvguide.com search engine provides consumers with a comprehensive experience by integrating online video with the breadth and depth of TV Guide’s database of listings, show and episode descriptions, news, reviews, ratings, user blogs, groups, message boards, photos,TV Guide magazine covers, and other contextual information, as well as video clips from TV Guide Network and certain third party networks. The site also features video search through our recently launched Online Video Guide, which allows users to search and access the best professionally produced video content on the Web. According to Nielsen/Net Ratings, our Online Networks (tvguide.com, jumptheshark.com, tv-now.com, tvshowsondvd.com and fansofrealitytv.com) averaged 5.3 million unduplicated unique users per month for the three months ended September 30, 2007, which includes an average of 4.8 million unique users per month at tvguide.com. In the month of September 2007, tvguide.com alone had 5.7 million unique users, its highest number ever.

TV Guide Broadband and TV Guide SPOT are advertiser supported, video-on-demand services featuring short-form, originally-produced entertainment programs that guide consumers to the most compelling fare on TV each week. TV Guide Broadband is available on tvguide.com and is also distributed on major video portals such as AOL Video, Veoh, BrightCove and Google Video. TV Guide SPOT is now available to approximately 29.4 million digital cable subscribers and to subscribers with stand-alone TiVo set-top boxes.

Publishing.The Publishing Segment consists primarily ofTV Guide magazine. For the three and nine months ended September 30, 2007, our Publishing Segment generated approximately 25% and 23% of our total revenue. Our Publishing Segment generates revenue primarily through subscription, advertising and newsstand sales ofTV Guide magazine.

For over 50 years, the TV Guide brand has been the most recognized, widely used and trusted resource in the United States for all aspects of the TV experience.TV Guide magazine plays a central role in the recognition of the TV Guide brand.TV Guide magazine also provides us with unique access to Hollywood and its content is repurposed and used across our other platforms.TV Guide magazine articles appear on tvguide.com and members of the magazine’s editorial staff create and maintain blogs on tvguide.com and appear on the TV Guide Network and other media outlets.

TV Guide magazine’s weekly content is centered on TV-related news, feature stories, TV celebrity photos, behind-the-scenes coverage, reviews and recommendations and national television listings.TV Guidemagazine is family-focused and primarily targets women readers ages 30 to 54. The magazine is published as one national edition, with either an Eastern/Central or a Mountain/Pacific time-zone listings.TV Guide magazine’s rate base, the volume of circulation guaranteed to advertisers, is currently 3.2 million. Total circulation for the three months ended September 30, 2007 averaged 3.3 million copies per week.

Cross Platform Costs.Cross Platform Costs includes costs related to the Company’s product development and technology group and corporate marketing expenditures, as well as corporate management, finance, legal, information technology, human resources and related expenses such as certain litigation and insurance costs. The product development and technology group focuses on developing next generation guidance products and services. Corporate marketing is primarily focused on cross-platform marketing initiatives to drive greater usage of our products and elevate our brand.

Exploration of Strategic Alternatives

On July 9, 2007 the Company announced that its Board of Directors has authorized the Company and its advisors to explore strategic alternatives intended to maximize shareholder value, which may include a sale of the Company. This review is currently in progress. There can be no assurance that any particular strategic alternative will be pursued or that any transaction or transactions will occur, or on what terms.

Consolidated Results of Operations

The following table sets forth certain financial information for the three and nine months ended September 30, 2007 and 2006 (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2007			2006		2007			2006
Revenues	$	159,551		$	148,947	$	471,894		$	426,268
Operating expenses:
Operating expenses, exclusive of expenses shown below		143,799			127,646		370,653			365,500
Depreciation and amortization		10,752			8,420		29,398			24,987

		154,551			136,066		400,051			390,487

Operating income		5,000			12,881		71,843			35,781
Interest income, net		6,556			6,788		19,180			18,566
Other income, net		276			86		469			337

Income from continuing operations before income taxes		11,832			19,755		91,492			54,684
Income tax (benefit) expense		(111,360	)		2,303		(83,238	)		14,031

Income from continuing operations		123,192			17,452		174,730			40,653
Discontinued operations:
Income from discontinued operations before income taxes		—			—		5,858			—
Income tax expense		—			—		2,217			—

Income from discontinued operations		—			—		3,641			—

Net income	$	123,192		$	17,452	$	178,371		$	40,653

Discussion

For the three months ended September 30, 2007, revenues were $159.6 million, an increase of $10.6 million, or 7.1%, compared to the same period in 2006. The increase was primarily due to a $9.5 million increase in IPG Patent Licensing revenue (See “Segment Results of Operations – Guidance Technology and Solutions”).

For the nine months ended September 30, 2007, revenues were $471.9 million, an increase of $45.6 million, or 10.7%, compared to the same period in 2006. The increase was primarily due to a $39.2 million increase in IPG Patent Licensing revenue and a $12.0 million increase in IPG Products and Services revenue, partially offset by a $5.7 million decline in VCR Plus+ revenue (See “Segment Results of Operations – Guidance Technology and Solutions”).

For the three months ended September 30, 2007, operating expenses, excluding depreciation and amortization, were $143.8 million, an increase of $16.2 million, or 12.7%, compared to the same period in 2006. This was primarily due to a $9.1 million increase in TV Guide Network programming and marketing expenses and a $5.9 million increase in corporate marketing costs.

For the nine months ended September 30, 2007, operating expenses, excluding depreciation and amortization, were $370.7 million, an increase of $5.2 million, or 1.4%, compared to the same period in 2006. The nine months ended September 30, 2007, includes the reversal of $10.7 million in accrued liabilities relating to a patent rights agreement with Mr. Yuen, while the nine months ended September 30, 2006 included the reversal of $8.9 million in accrued liabilities due to a settlement agreement with Ms. Leung (See Note 2 and Note 3 to the condensed consolidated financial statements).

Research and Development

Included in operating expenses above are costs associated with our research and development activities. Consolidated research and development expenses for the three months ended September 30, 2007 and 2006 were $9.1 million and $7.1 million, respectively, and $26.8 million and $20.3 million for the nine months ended September 30, 2007 and 2006, respectively. Expenses for enhancing our IPGs, including our 49% share of Guideworks, are recorded in the Guidance Technology and Solutions Segment. Expenses for developing next generation guidance products and services are performed by our product development and technology group and are recorded in Cross Platform Costs.

Depreciation and Amortization

For the three months and nine months ended September 30, 2007, depreciation and amortization was $10.8 million and $29.4 million, an increase of $2.3 million and $4.4 million, respectively, compared to the same periods in the prior year. These increases are primarily due to the amortization of intangible assets arising from the Aptiv acquisition and an increase in depreciation expense related to 2006 capital expenditures.

Legal Contingencies

Liabilities related to contingent legal matters at September 30, 2007 and at December 31, 2006 were $7.4 million.

For the three months and nine months ended September 30, 2007, Company-wide outside legal expenses were $4.1 million and $14.0 million, respectively, which is comprised of $2.7 million and $10.0 million of expenses recorded in the Guidance Technology and Solutions Segment, $0.3 million and $0.9 million in the Media Networks Segment and $1.1 million and $3.1 million recorded in Cross Platform Costs, respectively.

For the three and nine months ended September 30, 2006, Company-wide outside legal expenses were $2.5 million and $13.1 million, which is comprised of $4.3 million and $9.6 million of legal expenses recorded in the Guidance Technology and Solutions Segment, $0.6 million and $1.1 million in the Media Networks Segment and a benefit of $2.4 million and expense of $2.4 million recorded in Cross Platform Costs. The $2.4 million benefit recorded in Cross Platform Costs legal expenses in the third quarter of 2006, was due to reversing $3.9 million in accrued legal expenses relating to Mr. Yuen. We expect outside legal expenses to continue to be significant for the foreseeable future.

Income Taxes

The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes,as amended (“Interpretation 48”), on January 1, 2007. Interpretation 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. As a result of the implementation of Interpretation 48, the Company recognized a $56.4 million decrease in the liability for tax contingencies, which was accounted for as a decrease to the January 1, 2007 balance of accumulated deficit. After the date of adoption, the Company had a remaining liability of $24.5 million recorded for tax contingency reserves, which includes penalties and interest of $7.9 million.

We have income both from foreign and domestic sources. In the preparation of our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate, including estimating both our actual current tax exposure and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.

The overall effective tax rate we report in any single period is impacted by, among other things, the country in which earnings or losses arise, applicable statutory tax rates and withholding tax requirements for particular countries, the availability of net operating loss carryforwards and the availability of tax credits for taxes paid in certain jurisdictions. Because of these factors, our current and future tax expense or benefit as a percentage of income or loss before income taxes may vary from period to period.

Net Income

For the three months ended September 30, 2007, net income increased by $105.7 million compared to the same period in the prior year. This increase was entirely due to the reversal of $115 million in valuation allowance that had been recorded against the Company’s deferred tax assets, as discussed above.

For the nine months ended September 30, 2007, net income increased by $137.7 million compared to the same period in the prior year. This increase was primarily due to the reversal of $109 million in valuation allowance that had been recorded against the Company’s deferred tax assets and a $36.1 million increase in operating income, as discussed above.

Segment Results of Operations

Intersegment revenues and expenses have been eliminated from segment financial information as transactions between reportable segments are excluded from the measure of segment profit and loss reviewed by the chief operating decision maker. Segment information for the three months and nine months ended September 30, 2007 and 2006 is presented and reconciled to consolidated income from continuing operations before income taxes in accordance with SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information, in Note 7 of the condensed consolidated financial statements.

Discussion relating to operating expenses for our segments uses the definition of operating expenses included in Note 7 of the condensed consolidated financial statements.

Guidance Technology and Solutions

The following table shows the breakdown of revenues in the Guidance Technology and Solutions Segment (in thousands):


	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2007		2006		Dollars			Percent		2007		2006		Dollars			Percent
IPG Patent Licensing	$	40,731	$	31,273	$	9,458		30.2	%	$	125,498	$	86,330	$	39,168		45.4	%
IPG Products and Services		18,534		14,736		3,798		25.8	%		55,096		43,062		12,034		27.9	%
VCR Plus +		5,844		9,157		(3,313	)	(36.2	)%		25,380		31,068		(5,688	)	(18.3	)%
Other		3,228		1,971		1,257		63.8	%		8,913		7,226		1,687		23.3	%

Total	$	68,337	$	57,137	$	11,200		19.6	%	$	214,887	$	167,686	$	47,201		28.1	%

IPG Patent Licensing includes worldwide patent licenses to third party guide developers such as multi-channel video service providers, CE manufacturers, set-top box manufacturers, interactive television software providers and program listings providers in the online, personal computer and mobile phone businesses. For the three months and nine months ended September 30, 2007, revenues increased by $9.5 million and $39.2 million, respectively, when compared to the same periods in the prior year. These increases were primarily due to revenue from the recent patent license agreements with British Sky Broadcasting Group plc (fourth quarter of 2006) and Sky Italia S.r.l. (third quarter of 2007) and an increase in our U.S. cable and satellite licensees’ digital subscribers. The nine months ended September 30, 2007 also benefited from a $6.3 million payment from a licensee for previously unreported IPGs deployed from the second quarter of 2006 to December 2006. In addition, the nine months ended September 30, 2007 benefited from a $6.5 million payment from another licensee for previously unreported IPGs deployed from the second quarter of 2004 to December of 2006. Revenue from IPG patent licenses includes the amortization of up-front payments received under long-term patent licenses of $13.0 million and $13.2 million for the three months ended September 30, 2007 and 2006, respectively, and $44.0 million and $39.0 million for the nine months ended September 30, 2007 and 2006, respectively.

IPG Products and Services includes the worldwide distribution and support of Company-developed IPGs to multi-channel video service providers and CE manufacturers. For the three months ended September 30, 2007, revenues increased by $3.8 million or 25.8% compared to the same period in the prior year. This increase is primarily due to revenue from Aptiv, which was acquired on March 29, 2007 and an increase in U.S. digital cable subscribers that receive our i-Guide IPG, partially offset by a decline in incorporations of our IPG in CE products sold in Japan and North America. In Japan the weakness was due to declines in the recorder market, where we have historically had high incorporations, and certain manufacturers deploying unlicensed third party IPGs. We believe our recently introduced IPG for the digital terrestrial market will lead to increased incorporations in Japan from the second half of 2008 onwards. In North America we have introduced an expanded, more flexible CE IPG product line, which we also believe will lead to increased incorporations in the second half of 2008 onwards. In addition, the third quarter of 2006 also included $1.2 million in revenue for units shipped prior to the second quarter of 2006, but reported to us in the third quarter of 2006. For the nine months ended September 30, 2007, revenue increased by $12.0 million or 27.9% compared to the same period in the prior year. This increase is entirely due to revenue from Aptiv and an increase in U.S. digital cable subscribers that receive our i-Guide IPG.

For the nine months ended September 30, 2007, approximately 70% of IPG Patent Licensing and IPG Products and Services revenue relates to IPGs deployed in the U.S. and approximately 30% relates to IPGs deployed outside the U.S., primarily in Canada, Europe and Asia.

For the three months ended September 30, 2007, VCR Plus+ revenues decreased by $3.3 million compared to the same period in the prior year. This was primarily due to a decline in reported units shipped by CE manufacturers that incorporate VCR Plus+ and the third quarter of 2006 including $1.9 million in revenue from two manufacturers for units shipped prior to the second quarter of 2006, but reported to us in the third quarter of 2006. For the nine months ended September 30, 2007, VCR Plus+ revenues decreased by $5.7 million, primarily due to a decline in reported units shipped by CE manufacturers that incorporate VCR Plus+.

We believe that demand from consumers for more advanced guidance and recording capabilities will continue to grow as the cost of CE devices incorporating these technologies decreases. We believe this demand will increase our IPG Products and Services and IPG Patent Licensing revenues, and more than offset the anticipated decrease in VCR Plus + revenues.

Other revenue primarily consists of our IPG advertising revenue and the operations of Norpak Corporation, our majority owned subsidiary that manufactures data insertion equipment.

Guidance Technology and Solutions includes our 49% share of the operating expenses of the Guideworks, LLC joint venture with Comcast Corporation. For the three months ended September 30, 2007 and 2006, we recorded $3.6 million and $3.6 million, respectively, of operating expenses related to Guideworks, LLC. For the nine months ended September 30, 2007 and 2006, we recorded $10.8 million and $9.7 million, respectively, of operating expenses related to Guideworks, LLC.

For the three months ended September 30, 2007, operating expenses in this segment were $24.7 million, an increase of $2.6 million, or 11.9%, when compared to the same period in 2006. This increase was primarily due to Aptiv expenses. For the nine months ended September 30, 2007, operating expenses in this segment were $70.6 million, an increase of $9.5 million, or 15.5% when compared to the same period in 2006. This increase was primarily due to $6.2 million in Aptiv expenses and a $1.1 million increase in Guideworks’ expenses.

Media Networks

The following table shows the breakdown of revenues in the Media Networks Segment by business unit (in thousands):


	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2007		2006		Dollars			Percent		2007		2006		Dollars			Percent
TV Guide Network	$	30,788	$	30,389	$	399		1.3	%	$	96,511	$	97,016	$	(505	)	(0.5	)%
TVG		15,517		15,711		(194	)	(1.2	)%		41,624		40,810		814		2.0	%
Online Networks		4,072		2,219		1,853		83.5	%		9,213		7,231		1,982		27.4	%
Other		188		113		75		66.4	%		306		212		94		44.3	%

Total	$	50,565	$	48,432	$	2,133		4.4	%	$	147,654	$	145,269	$	2,385		1.6	%

TV Guide Network is available in analog cable, digital cable and DBS homes. TV Guide Network’s viewership comes primarily from analog cable homes where scroll data is still utilized for guidance. Digital cable and DBS homes have many more channels and generally use an IPG, rather than TV Guide Network, for listing information. TV Guide Network’s overall distribution increased by approximately 3.6 million subscribers since September 30, 2006 due to an increase in digital cable and DBS homes, partially offset by a decrease in analog cable homes. As of September 30, 2007, approximately 31% of our total distribution was in analog cable households, down from approximately 39% at September 30, 2006. We believe this trend will continue as more subscribers upgrade from analog cable to digital cable or switch to DBS and as MSOs migrate the TV Guide Network from analog to digital.

Despite a decrease in viewership caused by the continued decline in analog cable households discussed above, TV Guide Network revenues for the three and nine months ended September 30, 2007, were basically flat compared to the same periods in the prior year. In the first nine months of 2007, we have been able to maintain advertising revenue slightly below 2006 levels, due primarily to higher national advertising rates. With approximately 82% of TV Guide Network’s total revenue coming from advertising, we must continue to offset declines in viewership arising from the decrease in analog cable households, with increased advertising rates. As the majority of our affiliates are contracted under agreements with only cost-of-living increases available under certain contracts, long-term TV Guide Network revenue growth will be dependent on our ability to increase not only advertising rates but viewership as well. We continue to invest in programming and believe this investment will lead to increased viewership from our total distribution – analog cable, digital cable and DBS households.

For the three months ended September 30, 2007, TVG revenues were slightly lower compared to the same period in the prior year. TVG was able to deliver revenue at almost the same level as the prior year despite America TAB, Ltd. not renewing its license agreement in the second quarter of 2007. For the three months ended September 30, 2007, TVG processed $148.5 million in wagers, a 17% increase compared to the same period in the prior year. For the nine months ended September 30, 2007, TVG increased revenues by $0.8 million or 2.0% compared to the same period in the prior year. Our wagering operations and the wagering operations of our licensees have benefited from the continued growth in our distribution.

Online Networks derives revenues primarily from advertising. For the three months and nine months ended September 30, 2007, advertising revenues increased by $1.8 million and $2.0 million, respectively, or 84.4% and 28.4% compared to the same periods in the prior year. Online Networks benefited from increased program promotional advertising and higher CPMs. During the three months ended September 30, 2007, tvguide.com’s average monthly unique users increased by 53.5% compared to the same period in the prior year.

Operating expenses in this segment were $47.6 million and $124.4 million for the three and nine months ended September 30, 2007, an increase of $10.2 million or 31.3% and $8.8 million or 7.6% compared to the same periods in the prior year. These increases were primarily due to a $9.1 million and a $6.6 million increase in TV Guide Network programming and marketing costs for the three and nine months ended September 30, 2007, compared to the same periods in the prior year. During the third quarter of 2007, TV Guide Network premiered America’s Next Producer and aired episodes from the Surreal TV package for the first time on the Network. In addition, Making News Texas Style premiered original episodes in the third quarter of 2007. We believe that some of these programming investments will also benefit future periods as they will be aired in future quarters.

Additional Media Networks Operating Statistics


	Sept. 30, 2007	June 30, 2007	Sept. 30, 2006	June 30, 2006
Subscriber Data (in thousands) (1)
TV Guide Network	83,494	82,398	79,911	78,475
TVG	28,100	27,500	18,600	18,500
Online Networks unique users (2) (3)	5,291	4,493	3,117	2,458
tvguide.com unique users (2)	4,783	4,021	3,117	2,458

(1)	Subscriber data as of the above date represents:

•

Nielsen households for the domestic TV Guide Network

•

Households for TVG, based primarily on information provided by distributors

(2)	Average monthly unique users for the three month period, as measured by Nielsen/NetRatings.

(3)	Online Networks comprises the unduplicated unique users of tvguide.com and our other Web sites, subsequent to the date we acquired them.

Publishing

The following table shows Publishing segment revenues (in thousands):


	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2007		2006		Dollars			Percent		2007		2006		Dollars			Percent
TV Guide magazine	$	40,649	$	43,378	$	(2,729	)	(6.3	)%	$	109,353	$	113,313	$	(3,960	)	(3.5	)%

For the three and nine months ended September 30, 2007,TV Guide magazine revenues declined by $2.7 million and $4.0 million, respectively, compared to the same period in the prior year.TV Guide magazine maintains a 52 week fiscal year instead of a calendar year which results in an additional fiscal week every several years. The third quarter of 2006 included this extra fiscal week and therefore the results for the third quarter of 2006 include $2.6 million in revenue for the extra issue.

Subscriber revenues for the three months ended September 30, 2007 declined by $6.6 million or 23.8% primarily due to an anticipated decline in average rate per copy and the third quarter of 2006 including $1.7 million in subscription revenue related to the extra week discussed above. Subscriber revenues for the nine months ended September 30, 2007, declined by $14.1 million or 18.3% compared to the same period in the prior year. Average weekly paid subscribers during the nine months ended September 30, 2007, decreased by 10.6% compared to the same period in the prior year. In the first half of 2006, the magazine had a larger subscriber file as it was still in the process of managing its total circulation down towards a 3.2 million guaranteed rate base. The nine months ended September 30, 2006, also benefited from the extra week discussed above.

Newsstand revenues for the three and nine months ended September 30, 2007, increased by $1.6 million and $5.4 million, respectively, or 44.5% and 93.8%, when compared to the same periods in the prior year. These increases were primarily due to a $1.9 million and $5.5 million reduction in initial placement order (“IPO”) fees and rack acquisition costs, which are deducted from revenues. In 2007, we increased our cover price from $1.99 to $2.49. The revenue from this increase in cover price has offset the decline in average weekly newsstand circulation.

Advertising revenues for the three months and nine months ended September 30, 2007, increased by $2.5 million and $5.5 million, respectively, or 22.1% and 19.1% compared to the same periods in the prior year. These increases were primarily due to a 25% and 28% increase in advertising paging, compared to the same periods in the prior year, due to the stable circulation and strong audience data forTV Guidemagazine.

Operating expenses in this segment were $42.9 million and $118.7 million for the three and nine months ended September 30, 2007, a decrease of $7.9 million and $25.5 million compared to the same periods in the prior year. These decreases were primarily due to a $5.5 million and a $20.3 million decrease inTV Guide magazine production costs, mainly as a result of a decrease in issues, average printed copies per issue and a reduction in paper costs. For the three and nine months ended September 30, 2007, general and administrative expenses also decreased compared to the same periods in the prior year, primarily due to operating efficiencies. As we did in 2006, we anticipate spending significantly more on subscriber acquisition and promotional activities in the fourth quarter than was spent in the previous quarters of 2007.

TV Guide magazine incurred approximately $9.3 million in losses for the nine months ended September 30, 2007. We currently anticipate incurring losses of $20 million to $23 million for all of fiscal year 2007 and continuing, but declining, losses for the next two to three years thereafter.

Additional Publishing Operating Statistics


	Sept. 30, 2007	June 30, 2007	Sept. 30, 2006	June 30, 2006
TV Guide magazine circulation (in thousands) (1)
Newsstand (2)	261	211	292	283
Subscriptions	2,867	2,881	2,842	3,097
Sponsored / Verified	169	171	150	12

Total circulation	3,297	3,263	3,284	3,392

(1)	Average weekly circulation for the three months ended.

(2)	Current period numbers include an estimate for returns. Prior period numbers are updated to reflect actual returns.

Cross Platform Costs

The following table shows the breakdown of operating expenses within Cross Platform Costs (in thousands):


	Three months ended September 30,				Change					Nine months ended September 30,				Change
	2007		2006		Dollars			Percent		2007		2006		Dollars			Percent
Product Development and Technology	$	4,794	$	5,045	$	(251	)	(5.0	)%	$	13,179	$	7,584	$	5,595		73.8	%
Corporate Marketing		6,625		775		5,850		754.8	%		9,639		884		8,755		990.4	%
Corporate General and Administrative		15,797		10,984		4,813		43.8	%		31,398		34,688		(3,290	)	(9.5	)%

Total	$	27,216	$	16,804	$	10,412		62.0	%	$	54,216	$	43,156	$	11,060		25.6	%

For the three months and nine months ended September 30, 2007, product development and technology expenses were $4.8 million and $13.2 million, respectively. Costs incurred to develop next generation guidance products and services in the first half of 2006 were not significant, as this group was in the early stages of being formed. In 2007 the build-out of this group was completed and in fiscal year 2007 we expect to incur approximately $19 million in expenses in cross-platform product development and technology.

For the three and nine months ended September 30, 2007, corporate marketing expenses were $6.6 million and $9.6 million, respectively. Costs incurred for corporate marketing in the first nine months of 2006 were minimal, as this group was in the process of being formed. In fiscal year 2007, we expect to incur approximately $22 million in corporate marketing expenses, which includes the national cross-platform consumer marketing campaign launched at the end of the third quarter of 2007. We believe this marketing campaign will drive greater usage of our products and elevate our brand.

For the three months ended September 30, 2007, corporate general and administrative expenses were $15.8 million. The increase in expenses over the same period in the prior year was primarily due to the three months ended September 30, 2007 including $2.5 million in costs relating to the exploration of strategic alternatives. In addition the three months ended September 30, 2006 benefited from the reversal of $3.9 million in accrued legal expenses relating to Mr. Yuen.

For the nine months ended September 30, 2007, corporate general and administrative expenses were $31.4 million. The nine months ended September 30, 2007, benefited from the reversal of $10.7 million in accrued patent rights liabilities relating to Mr. Yuen, while the nine months ended September 30, 2006 had a $1.7 million benefit from the reversal of accrued legal fees relating to Mr. Yuen discussed above and the reversal of $8.9 million in accrued expenses due to the settlement agreement with Ms. Leung (See Note 2 to the condensed consolidated financial statements). The nine months ended September 30, 2007 also included $3.2 million in costs relating to the exploration of strategic alternatives. After taking these items into account, the remaining $6.4 million or 14.1% decrease for the nine months ended September 30, 2007, compared to the same period in the prior year, is primarily due to a reduction in legal expenses and corporate overhead.

Liquidity and Capital Resources

As of September 30, 2007, our cash, cash equivalents and marketable securities were $546.7 million. In addition, we had restricted cash of $32.4 million maintained in segregated, interest-bearing accounts. Of this amount, $31.5 million relates to the November 2002 management and corporate governance restructuring (See Note 3 to the condensed consolidated financial statements).

Net cash provided by operating activities was $57.7 million for the nine months ended September 30, 2007, compared to $68.5 million for the same period last year. Income from continuing operations before income taxes during the nine months ended September 30, 2007 was $91.5 million compared to $54.7 million during the same period in 2006. We made $12.9 million in net income tax payments in the first nine months of 2007, versus the receipt of $44.7 million in net income tax refunds during the same period in 2006. The nine months ended September 30, 2006 also included the release of $8.4 million in restricted cash (See Note 2 to the condensed consolidated financial statements).

Net cash flows used in investing activities were $67.4 million for the nine months ended September 30, 2007 compared to $65.8 million used in the same period last year. The increase is primarily due to the Aptiv acquisition, partially offset by a $9.5 million decrease in net marketable securities purchases.

For the nine months ended September 30, 2007, we made capital expenditures of $15.7 million compared to $15.8 million in the same period in the prior year. In fiscal year 2007, we plan to make total capital expenditures of approximately $34 million.

Net cash flows provided by financing activities were $2.9 million for the nine months ended September 30, 2007, compared to net cash used of $0.3 million in the same period in the prior year. This increase was primarily due to a $3.2 million increase in proceeds and excess tax benefits from the exercise of stock options.

We receive nonrefundable prepaid license fees from certain licensees. Prepaid subscriptions and license fees are included in deferred revenue on the condensed consolidated balance sheets. As of September 30, 2007, current and long-term balance sheet deferred revenue totaled $465.7 million. Our liability for prepaid magazine subscriptions is limited to the unearned payments in the event customers cancel their subscriptions. Our liability for other payments is limited to a refund of unearned payments in the event that we are unable to provide service. No material refunds have been paid to date. We reduced our balance sheet deferred revenue by $31.8 million in the first nine months of 2007. We anticipate reducing our balance sheet deferred revenue by approximately $50 million for all of fiscal 2007.

We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any interest in so-called limited purpose entities, which include special purpose entities and structured finance entities.

Based on past performance and future expectations, we believe existing cash, cash equivalents and marketable securities balances will be sufficient to satisfy our expected working capital, capital expenditure and debt service requirements in the foreseeable future.

Critical Accounting Policies and Estimates

This MD&A is based on our condensed consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and assumptions in applying certain critical accounting policies. Certain accounting estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting the estimates could differ markedly from our current expectations.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements. Management believes there have been no significant changes during the three month period ended September 30, 2007 to the items that we disclosed as our critical accounting policies and estimates in the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2006.

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

Our MD&A section and other portions of this Form 10-Q contain various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events. Statements containing expressions such as “may,” “will,” “continues,” “believes,” “intends,” “anticipates,” “estimates,” “plans” or “expects” used in the Company’s periodic reports on Forms 10-K, 10-Q and 8-K filed with the SEC are intended to identify forward-looking statements. The Company cautions that these and similar statements included in this report and in previously filed periodic reports including reports filed on Forms 10-K, 10-Q and 8-K are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, those referred to below in “Certain Risks Affecting Business, Operating Results and Financial Condition” and elsewhere in this Form 10-Q. Such statements reflect the current views of the Company or its management with respect to future events and are subject to certain risks, uncertainties and assumptions including, but not limited to those discussed below. Such factors, together with the other information in this Form 10-Q, should be considered carefully in evaluating an investment in the Company’s common stock. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on the Company’s behalf may issue. The Company undertakes no obligation to revise any forward-looking statements to reflect events or circumstances after the date of this report.

CERTAIN RISKS AFFECTING BUSINESS,

OPERATING RESULTS AND FINANCIAL CONDITION

This section highlights some specific risks affecting our business, operating results and financial condition. The list of risks is not intended to be exhaustive and the order in which the risks appear is not intended as an indication of their relative weight or importance.

Our exploration of strategic alternatives may have adverse impacts.

On July 9, 2007, the Company announced that its Board of Directors authorized the Company and its advisors to explore strategic alternatives intended to maximize shareholder value, which may include a sale of the Company. The process could have an adverse impact on the Company’s relationships with employees, customers and suppliers. There can be no assurance that any particular strategic alternative will be pursued or that any transaction or transactions will occur, or on what terms. In addition, the announcement of the Company’s decision to explore strategic alternatives, and any future developments in this regard, could materially and adversely affect, and cause significant fluctuations in, the market price of our common stock.

New products and services, rapid technological change and changes in consumer demand may adversely affect our operations.

The emergence of new consumer entertainment products, services and technologies, changes in consumer preferences and other factors may limit the life cycle of our products, services and technologies and any future products, services or technologies we might develop. Although we believe that we will continue to develop attractive new products and services, the industries in which we operate are characterized by rapid changes, including technological changes and changes in consumer demand. Our future operations could be adversely impacted by our ability to identify emerging trends in our markets and to develop and market new products and services that respond to competitive offerings, technological changes and changing consumer preferences in a timely manner and at competitive costs.

Our investments in developing new products and services, improving existing products and services, and promoting our business through corporate marketing initiatives may not be effective.

We have recently established a new product development and technology group to enhance the Company’s product development efforts, and we are committing significant resources to our product development efforts. The process of developing and marketing new products and services is inherently complex and uncertain, and there are a number of risks, including the following:

•

we cannot assure you that the level of funding and significant resources we are committing for investments in new products, services, technologies and initiatives will be sufficient or result in successful new products, services or technologies;

•

we cannot assure you that our newly developed products, services or technologies can be successfully protected as proprietary intellectual property rights or will not infringe the intellectual property rights of others;

•

we cannot assure you that any new products or services that we develop will achieve market acceptance;

•

our products, services and technologies may become obsolete due to rapid advancements in technology and changes in consumer preferences; and

•

our competitors and/or potential customers may develop products, services or technologies similar to those developed by us, resulting in a reduction in the potential demand for our newly developed products, services or technologies.

Our failure to successfully develop new and improved products, services and technologies, including as a result of any of the risks described above, may reduce our future growth and profitability and may adversely affect our business results and financial condition.

We have also recently launched various corporate marketing initiatives, including a national cross-platform consumer marketing campaign, designed to drive greater usage of our products and elevate our brand, and thereby increase the Company’s revenues. These marketing initiatives represent a significant investment of both time and money. There can be no assurance that these marketing initiatives will ultimately be successful in driving greater usage of our products and elevating our brand, or that they will lead to greater revenues for the Company.

We have made and expect to make significant investments in infrastructure which, if ineffective, may adversely affect our business results.

We have made and expect to make significant investments in infrastructure, tools, systems, technologies and content, including initiatives relating to digital asset and rights management and data warehouses, aimed to create, assist in the development or operation of, or enhance our ability to deliver innovative guidance products and services across multiple media, digital and emerging platforms. These investments may ultimately cost more than is anticipated, their implementation may take longer than expected and they may not meaningfully contribute to or result in successful new or enhanced products, services or technologies.

We face risks arising from our TV Guide magazine publishing business.

Risks Relating to the Transformation of TV Guide Magazine.Prior to the re-launch of TV Guide magazine in a full-sized, full-color format in October 2005, the operating results of our magazine publishing business had deteriorated over a period of several years due to significant declines in the digest-sized magazine’s newsstand sales, contribution per copy, and advertising revenue. Prior to the re-launch, we sought to reverse such declines through a variety of different initiatives, including editorial changes and aggressive promotional offerings. However, those efforts were unsuccessful. Consequently, during the fourth quarter of 2005 we transformed our TV Guide magazine from a digest-sized, listings oriented format to a more contemporary full-sized, full-color magazine, filled with more features and photos and targeted at a younger demographic. However, several other widely circulated magazines and other media outlets seek to appeal to this market segment and the advertisers who seek to reach it. A business initiative of this scale is inherently risky and there can be no assurance that our assumptions are valid or that our circulation and advertising goals can be achieved. Additionally, the ongoing costs associated with the transformation of the magazine are substantial, and should this initiative ultimately prove unsuccessful, the cost of pursuing other alternatives may be significant. We cannot assure that the transformed magazine or our magazine publishing business will achieve profitability.

Risks Relating to the Magazine Publishing Business. Both our advertising and circulation revenue can be negatively impacted by decreases in circulation and readership levels. In addition,TV Guide magazine and the overall magazine industry have been subjected to increasing competition from sources other than traditional print formats, such as the Internet. The risk exists that this trend may continue. We have attempted to take advantage of the growth of online media and advertising, but we face increasing competition from other online sources for both advertising and circulation revenues. To the extent advertisers view other forms of media as providing a more cost-effective or generally superior method for reaching consumers with advertising, the profitability of publishing magazines, includingTV Guide, will be negatively impacted. We may not be successful in achieving the volume of circulation guaranteed to advertisers or may incur significant additional costs in attempting to do so and we may not be able to recover these costs through circulation and advertising revenues. If we cannot maintain our magazine circulation or if we experience erosion in the magazine’s readership, this could, in turn, adversely affect our circulation and advertising revenues.

We face risks arising from our TV Guide Network strategy.

Revenues at TV Guide Network consist of affiliate fees and advertising revenues; however, since the majority of our affiliates are contracted under long-term agreements with only cost-of-living increases available under certain contracts, we do not expect significant growth in affiliate revenues in the future. Accordingly, the results at TV Guide Network are highly dependent upon advertising revenue. Advertising revenue at the TV Guide Network primarily comes from commercials sold during our programming hours (11:00 AM to 2:00 AM) and infomercials broadcast between 2:00 AM and 11:00 AM. Advertising sales are primarily dependent on the extent of distribution of the network; viewership ratings, such as those published by Nielsen; and the strength of the market for advertising. While TV Guide Network has benefited, to a certain degree, from the expanded distribution that we have achieved, a significant portion of the expanded distribution has been to DBS subscribers, who did not previously have TV Guide Network as a programming choice. Digital cable and DBS homes also have many more channels and generally use an IPG, rather than TV Guide Network, for listing information. As such, the viewership of TV Guide Network in digital cable and DBS homes has been minimal to date. Also, certain of the long-term agreements with MSOs for the TV Guide Network allow for migration to exclusively digital carriage. If the MSOs elect to migrate TV Guide Network to digital carriage, TV Guide Network will generally experience a corresponding reduction in subscribers, resulting in reduced affiliate fee revenue and potentially reducing advertising revenue, due both to the smaller pool of potential viewers and the fact that TV Guide Network’s viewers come primarily from analog cable homes where scroll data is still utilized for guidance. We have been investing in new programming and marketing initiatives at TV Guide Network with an expectation that the additional investments that we are making in programming and marketing will, in the future, result in increased viewership in both cable and DBS homes. If our viewership ratings do not improve sufficiently or we are unable to

maintain broad distribution of the TV Guide Network, our increased programming and marketing costs could have a material adverse effect on our results of operations. While we have undertaken significant programming and marketing initiatives designed in part to position TV Guide Network as an entertainment destination independent of listings data, there can be no assurance that such initiatives will ultimately result in increased viewership ratings and advertising revenues, or that any initial increase in viewership ratings will be sustainable over time.

Failure to attract and retain key employees could adversely impact our business.

In order to be successful, we must attract and retain talented executives and other key employees, including those in managerial, technical, sales, marketing and support positions. Our businesses require individuals with relevant experience and diverse skill sets, and the market for these personnel is highly competitive. The failure to attract employees with the requisite skills and abilities to our company, or the loss of key employees, could adversely impact our ability to meet key objectives, such as the timely and effective development and delivery of products and services, and could otherwise have a significant impact on our operations.

Digital recapture may adversely affect our TV Guide Network business and operating results.

Cable television is transmitted on a limited frequency spectrum that must be allocated between multiple analog and digital channels. As digital penetration increases, MSOs are reclaiming analog bandwidth to launch more high-definition channels and other services, and are likely to continue this recapture until they rebuild their plants to increase bandwidth or there is stability in the mix of analog and digital carriage. Digital recapture will result in a significant decline in the distribution of our analog TV Guide Network, which could negatively impact our operating results.

The market for IPG advertising and our ability to fully exploit it may not develop.

The market for IPG advertising is at an early stage of development and we cannot assure you that we will succeed in our efforts to develop IPG advertising as an advertising medium widely accepted by consumers and advertisers. In addition, MSO, DBS and IPTV providers who have a patent license from us are not required to provide advertising in their IPG. Therefore our ability to derive advertising revenues from IPGs distributed by our patent licensees is also dependent on the implementation of IPG advertising by such licensees.

Our business may be adversely affected by fluctuations in demand for consumer electronics devices incorporating our technologies.

We derive significant revenues from manufacturer license fees for our VCR Plus+ and IPG technologies based on the number of units shipped. We do not manufacture hardware, but rather depend on the cooperation of CE manufacturers to incorporate our VCR Plus+ and IPG technologies into their products. Generally, our license agreements do not require manufacturers to include our technology in any specific number or percentage of units, and only a few of these agreements guarantee a minimum aggregate licensing fee. Purchases of new CE devices, including television sets, integrated satellite receiver decoders, DVRs, DVD recorders, personal computers and Internet appliances are largely discretionary and may be adversely impacted by increasing market saturation, durability of products in the marketplace, new competing products, alternate consumer entertainment options and general economic trends in the countries or regions in which these products are offered. As a result, our future operating results may be adversely impacted by fluctuations in sales of CE devices employing our technologies.

In addition, the decision by manufacturers to incorporate our IPG technology into their products is a function of what other guide technologies and products are available. Our future operating results may be adversely impacted as a result of CE manufacturers opting not to incorporate our technology into their devices as a result of other available alternatives.

VCR Plus+ revenues have declined over time and are expected to decline further.

The worldwide shipment of VCRs has declined, and is expected to continue to decline as VCRs are replaced by digital recording devices such as DVD recorders and DVRs. Although VCR Plus+ is now being incorporated into some lower price point digital recording devices, there is no assurance that this practice will become widespread or continue. Furthermore, in order to encourage the incorporation of our IPG in CE products, we have been offering certain large CE manufacturers the opportunity to bundle both our IPG and VCR Plus+ technology at a significant discount beginning with sales reported in fiscal 2005. While we believe this will ultimately accelerate the incorporation of our IPG to our benefit, there can be no assurance that this will be the case. In addition, there can be no assurance that we will be able to renew our existing VCR Plus+ agreements as they expire, upon terms as favorable to us as those contained in prior contracts, or at all.

We face competition in many areas and the competition could negatively impact our operating results.

We face competition from a wide range of other companies in the communications, advertising, media, entertainment, publishing, information, Internet services, software and technology fields. The competitive environment could, among other results, require price reductions for our products and services, require increased spending on marketing and product development, limit our ability to develop new products and services, limit our ability to acquire rights to produce and/or display content that is popular among our targeted audience, limit our ability to expand our customer base or even result in attrition in our customer base. Any of these occurrences could negatively impact our operating results. Many of our competitors have greater financial and human resources than we do. As a result, these competitors can compete more effectively by offering customers better pricing and other more favorable terms and conditions. Our IPGs face competition from companies that produce and market program guides as well as television schedule information in a variety of formats, both print and electronic. Several products and services on the market offer simplified VCR programming functions that compete with our VCR Plus+ system. TV Guide magazine competes with general entertainment and other magazines at newsstand and for subscribers. The TV Guide Network competes with general entertainment channels for television viewership and carriage on cable and DBS systems. Online Networks competes for visitors with general entertainment Web sites and online search providers, including sites that provide television listings, television-specific information and/or that enable users to locate and view video on the Internet. Each of TV Guide magazine, TV Guide Network and Online Networks vie for marketers’ advertising spend with other media outlets. TVG competes for viewers with other television networks, one of which is under common ownership with several racetracks and accepts wagers from residents of more states than TVG accepts. In addition, TVG competes for wagering and telecast rights with other networks and account wagering providers. TVG licenses its patents, and sublicenses audiovisual and pari-mutuel account wagering rights for content from various horse racetracks, to certain account wagering providers and is paid royalties based upon account wagering from certain horse racetracks processed by its licensees. These licensees currently maintain wagering accounts for residents of certain states in which TVG does not. TVG’s contracts for account wagering and telecast rights with racetracks, as well as its sublicensing arrangements, have varying maturities and renewal terms. TVG could be unable to renew its current contracts when they expire or the renewal terms could be less favorable than the current terms, which could have an adverse effect on the Company’s TVG business. In addition, TVG and its licensees compete for wagering revenue with other account wagering operations and industry participants.

Any infringement by us or some of our licensees on patent rights of others could affect the development of our products and services or result in litigation.

Patents of third parties may have an important bearing on our ability to offer some of our products and services. Many of our competitors as well as other companies and individuals have obtained, and may be expected to obtain in the future, patents that concern products or services related to the types of products and services we plan to offer. We may not be aware of all patents containing claims that may pose a risk of infringement by our products and services. In addition, in the United States, patent applications are generally confidential for a period of 18 months from the filing date, or until a patent is issued in some cases, so we cannot evaluate the extent to which our products and services may be covered or asserted to be covered by claims contained in pending patent applications prior to their publication. If one or more of our products or services is found to infringe patents held by others, we may be required to stop developing or marketing the products or services, to obtain licenses to develop and market the products or services from the holders of the patents or to redesign the products or services in such a way as to avoid infringing the patent claims. We cannot assess the extent to which we may be required in the future to obtain licenses with respect to patents held by others and whether the licenses would be available or, if available, whether we would be able to obtain the licenses on commercially reasonable terms. If we were unable to obtain the licenses, we might not be able to redesign our products or services to avoid infringement. Furthermore, we provide indemnification protection to some of our IPG licensees under which we may be obligated to indemnify those licensees and hold them harmless from some claims, including claims that our or their products or services infringe other parties’ patents. The Company’s indemnification obligations are typically limited based upon the amounts paid to the Company by the licensee under the license agreement; however, some license agreements, including those with our largest MSO and DBS providers, do not specify a limit on amounts that may be payable under the indemnity arrangements. Certain of the Company’s large MSO and DBS licensees have received notices of pending or threatened patent claims from Finisar (see Note 4 to the Consolidated Financial Statements). Furthermore, the costs of investigating, defending or remedying alleged infringement and/or related indemnification claims could be substantial and could have a material adverse effect on our financial condition or results of operations.

Some terms of our agreements with licensees could be interpreted in a manner that could adversely affect licensing revenue payable to us under those agreements.

Some of our license agreements contain “most favored nation” clauses. These clauses typically provide that if we enter into an agreement with another licensee on more favorable terms, we must offer some of those terms to our existing licensee. We have entered into a number of license agreements with terms that differ in some respects from those contained in other agreements. These agreements may obligate us to provide different terms to licensees, which could, if applied, result in lower revenues or otherwise adversely affect our business, financial condition, results of operations or prospects. While we believe that we have appropriately accounted for the most favored nation terms included in our license agreements, these contracts are complex and other parties could reach a different conclusion that, if correct, could have an adverse effect on our financial condition or results of operations.

Dependence on the cooperation of MSOs and DBS providers, television broadcasters, hardware manufacturers, publications, data providers and delivery mechanisms could adversely affect our revenues.

We rely on third party providers to deliver our IPG data to CE devices that include our IPG. Further, our national data network provides customized and localized listings to our IPG service for MSOs and DBS providers and licensees of our data used in third party IPGs for MSOs and DBS providers. There can be no assurance that these delivery mechanisms will distribute the data without error or that the agreements that govern some of these relationships can be maintained on favorable economic terms.

To deliver our IPG data to CE devices, we have arrangements to carry our data in a part of the television signal called the vertical blanking interval (“VBI”) or its digital signal equivalent, of television stations included in the public broadcasting network, independently owned stations, and stations owned and operated by various station group owners. We have historically only delivered our IPG data to CE devices through the VBI in analog broadcast signals.

In anticipation of the FCC mandate of 100% digital transmission, which takes effect in 2009, we recently entered into a long-term IPG data distribution and advertising agreement with CBS Corporation, which will allow for the distribution of our CE IPG data over the digital broadcast signals of both CBS owned and operated stations and participating affiliates following the installation of necessary equipment. We also rely on other arrangements, which are not long-term, with other broadcasters for secondary carriage of our IPG data to CE devices. We cannot assure you that we will be able to successfully renew or extend any of our existing carriage arrangements when they expire, or that renewals will be on terms that are as favorable to the Company as the arrangements currently in effect. Our inability to renew the existing arrangements on terms that are favorable to the Company, or enter into alternative arrangements that allow us to effectively transmit our IPG data to CE devices throughout the United States could have a material adverse effect on our CE IPG business in the United States.

Our IPG data to CE devices broadcast through the VBI can be, and has been in the past in some markets, deleted or modified by some of the local service providers. Widespread deletion or modification of this data by service providers could have a material adverse impact on our CE IPG business. To mitigate this risk, we have entered into agreements with many service providers to ensure that our IPG data to CE devices will not be deleted or modified by such systems. Additionally, cable companies are progressively moving their systems from an analog format to a digital format, which poses certain problems to the passage of our IPG data to CE devices carried in their signals. Solving such problems will require the cooperation of third parties such as the MSOs and DBS providers, television broadcasters and hardware manufacturers, and may also require additional investment by the Company. Furthermore, in order for CE devices that incorporate our IPG to receive our data, such data must also be able to pass through any receivers through which such CE devices are receiving television programming signals. We do not currently deliver our IPG data to CE devices over satellite networks. Even if our IPG data is passed to cable subscribers through cable networks by the service providers, there is a risk that the cable set-top boxes deployed by such subscribers can impede the passage of our IPG data to CE devices. Widespread impedance of our IPG data to CE devices in any of the manners set forth above could have a material adverse impact on our CE IPG business.

We are currently making significant investments in the U.S., Europe and Asia to build the capability to provide our program listings information via digital broadcast signals to support the next generation of products from our manufacturing partners. This involves deploying equipment to aggregate and insert listings data, and securing bandwidth in digital broadcast streams to deliver that data. If we are unable to complete this digital delivery build-out in each of our regions in time to meet the planned deployment of the next generation of digital broadcast reliant CE devices, this could have a material adverse impact on our CE IPG business.

We deliver our data to our IPG service for MSOs and to licensees of our data used in third party IPGs for MSOs via satellite transmission, among other means. While we have built in certain redundancies in our data delivery operation, a third party provides us with satellite capacity to transmit our data to our IPG service for certain MSOs and to licensees of our data used in third party IPGs for MSOs. Our arrangement with the third party provider may be terminated on little or no notice. In the event that this provider of satellite capacity elects not to provide this capacity to transmit our data, there can be no assurance that all of our customers who currently receive our data via this provider will be able to receive our data via alternative means without significant delay or additional cost to us. In the event that such provider elects not to transmit our data, our business, operating results and financial condition could be adversely affected.

In addition, we purchase some of our program guide information from commercial vendors. The quality, accuracy and timeliness of that data may not continue to meet our standards or be acceptable to consumers. Our VCR Plus+ system relies on consumer access to PlusCode numbers through licensed publications. We depend on the maintenance and renewal of agreements governing the PlusCode publications to ensure the distribution of the PlusCodes.

Limitations on control of joint ventures may adversely impact our operations.

The Company holds its interests in certain businesses, including Guideworks and IPG Inc., as a joint venture or in partnership with nonaffiliated third parties. As a result of such arrangements, the Company may be unable to control the operations, strategies and financial decisions of such joint venture or partnership entities which could in turn result in limitations on the Company’s ability to implement strategies that the Company may favor, or to cause dividends or distributions to be paid. In addition, the Company’s ability to transfer its interests in businesses owned with third parties is limited under certain joint venture, partnership or similar agreements.

Seasonality and variability of consumer electronics product shipments and advertising sales may affect our revenues and results of operations on a quarterly or annual basis.

Shipments of CE products tend to be higher in the second and fourth calendar quarters. We recognize revenues associated with our technology incorporated in these CE products when the shipments are reported to us, which is normally the quarter immediately following that of actual shipment by the licensee. In addition, manufacturer shipments vary from quarter to quarter depending on a number of factors, including retail inventory levels and retail promotional activities. General advertising also tends to be higher in the fourth quarter. As a result, we may experience variability in our licensing and advertising revenues.

Paper and postal price increases can materially raise our costs associated with the production and delivery of TV Guide magazine.

The price of paper can be a significant factor affectingTV Guide magazine’s operating performance. We do not hedge against increases in paper costs. Paper prices may increase and if we cannot pass these costs on to our customers, the increases may have a material adverse effect on us. Postage for product distribution, billings, renewals, and direct mail solicitations is also a significant, uncontrollable expense to us.

The gaming activities of TVG are extensively regulated.

TVG derives a substantial portion of its revenue from pari-mutuel wagering, which is subject to extensive statutory and regulatory oversight. Additionally, TVG’s Internet-based horse race wagering operations are heavily regulated. Adverse changes in the political climate, new legislation or regulatory activity could harm our business. From time to time, the California Horse Racing Board has considered various proposals that, if enacted, would detrimentally impact the revenue that TVG derives from the California market or otherwise adversely impact TVG’s business model. From time to time, members of Congress and state legislatures have introduced bills that would prohibit or severely restrict off-track interstate pari-mutuel or Internet-based wagering. If any such legislation were enacted into law, TVG’s advance deposit wagering business could be adversely affected. Congress recently passed legislation which prohibits the use of various electronic payment methods and systems in connection with illegal Internet-based wagering activities. While this recently enacted legislation continues to provide an exemption for advance deposit wagering on horse racing as conducted by TVG, there is a risk that further legislation or regulations could be enacted or promulgated that could adversely affect the business, operations or prospects of our TVG business. In addition, from time to time, payment systems have, on behalf of their member financial institutions, taken actions to limit the use of credit cards and debit cards for non face-to-face gaming transactions as a means of combating illegal Internet-based gambling operations and may do so in the future in response to additional regulatory burdens. Although such efforts to restrict payment mechanisms may not be intended to restrict the lawful activity of licensed operations such as TVG, the resulting inconvenience to our customers caused by such measures could harm our business or growth prospects. The adoption of any laws, rules or regulations that further limit the ability of TVG to conduct interstate pari-mutuel wagering could have a material adverse effect on our TVG business.

Continued consolidation of the cable and satellite broadcasting industry could adversely affect existing agreements; the impact of these changes is not clear.

We have entered into agreements with a large number of cable MSOs and DBS providers for the licensing or distribution of our technology, products and services. If, as expected, consolidation of the cable and satellite broadcasting industry continues, some of these agreements may be affected by mergers, acquisitions or system swaps. We cannot assure you that any measures that we have taken to protect us against any negative consequences resulting from those transactions will be effective. Also, a service provider that files a bankruptcy petition or otherwise restructures or liquidates could avoid its future obligations and discharge its past payment obligations under the agreement in some circumstances. Any such events could have a material adverse effect on the amount of revenue we receive under these agreements.

Unfavorable outcomes in legal proceedings may adversely affect our business and operating results.

Our results may be affected by the outcome of pending and future litigation and the protection and validity of our patents and other intellectual property rights. Our patents and other intellectual property rights are important competitive tools and many generate income under license agreements. We cannot assure you that our intellectual property rights will not be challenged, invalidated or circumvented in the United States or abroad. Unfavorable rulings in our legal proceedings, including those described in Note 3, “Litigation and Other Contingencies,” to the condensed consolidated financial statements, may have a negative impact on us that may be greater or smaller depending on the nature of the rulings. In addition, we are currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal) or lawsuits by governmental agencies or private parties. If the results of these investigations, proceedings or suits are unfavorable to us or if we are unable to successfully defend against third party lawsuits, we may be required to pay monetary damages or may be subject to fines, penalties, injunctions or other censure that could have a material adverse effect on our business, financial condition and operating results. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and operating results.

Government regulations may adversely affect our business.

The satellite transmission, cable and telecommunications industries are subject to pervasive federal regulation, including FCC licensing and other requirements. These industries are also often subject to extensive regulation by local and state authorities. While these regulations do not apply directly to us, they affect cable television providers and other multi-channel video programming distributors (“MVPDs”), which are the primary customers for certain of our products and services. FCC regulations prohibit MPVDs (except DBS providers) from deploying after July 1, 2007 consumer electronic navigation devices (e.g., set-top boxes) with combined security and non-security functions (the “integration ban”). The Commission recently granted a number of requests for waiver of the integration ban, and denied several petitions for waivers or deferrals. Petitions for reconsideration of the decisions denying waivers are pending before the Commission. Resolution of these petitions and other FCC action with respect to these issues could affect demand for IPGs incorporated into set-top boxes or CE devices.

Our stock price has been volatile.

The market price of our common stock has historically been volatile. It is likely that the market price of our common stock will continue to be subject to significant fluctuations. We believe that future announcements concerning us, our competitors or our principal customers, including technological innovations, new product and service introductions, governmental regulations, litigation or changes in earnings estimated by us or analysts may cause the market price of our common stock to fluctuate substantially in the future. Sales of substantial amounts of outstanding common stock in the public market could materially and adversely affect the market price of our common stock. Further, in recent years the stock market has experienced extreme price fluctuations in equity securities of technology and media companies. These price and volume fluctuations often have been unrelated to the operating performance of those companies. These fluctuations, as well as general economic, political and market conditions, such as armed hostilities, acts of terrorism, civil disturbances, recessions, international currency fluctuations, or tariffs and other trade barriers, may materially and adversely affect the market price of our common stock.

Interruption or failure of communications and transmission systems and mechanisms could impair our abilities to effectively provide our products and services, which could affect our revenues.

The provision of certain of our products and services depends on the continuing operation of communications and transmission systems and mechanisms, including satellite, cable, wire, over the air broadcast communications and transmission systems and mechanisms. These communication and transmission systems and mechanisms are subject to significant risks and any damage to or failure of these systems and mechanisms could result in an interruption of the provision of our products and services. Interruptions in the provision of our products and services could adversely affect our revenues, and our brand could be damaged if people believe our

products and services are unreliable. The communications and transmission systems and mechanisms that we depend on are vulnerable to damage or interruption from telecommunications and satellite failures, natural disasters, terrorists attacks, power loss, computer viruses and similar events. The communications and transmission systems and mechanisms that we depend on are not fully redundant, and our disaster recovery planning cannot account for all eventualities.

Although we recently implemented a disaster recovery program, a disaster could nevertheless damage our operations.

We recently implemented a disaster recovery or business continuity program as part of a phased implementation of a more comprehensive and responsive recovery capability. While the new plan provides recoverability for our critical operations, the system is not yet comprehensive as it relates to all of our production, publishing and transmission operations. In the event of a catastrophic disruption, there remain some single points of failure or delays in timely recovery of or within our processes and technology that would cause us to lose, or cause an undue delay in, our ability to provide transmission or publishing capabilities. In that event, we would have to operate at reduced service levels that could have a material adverse effect on our relationships with our customers, our revenue generation and our brand.

News Corporation’s interests may diverge from those of other stockholders and the Company.

News Corporation has significant influence over our business because of its beneficial ownership of our common stock and the number of its executives who serve on our Board of Directors. There can be no assurance that its interests are aligned with that of our other stockholders. Investor interests can differ from each other and from other corporate interests and it is possible that this significant stockholder with a stake in corporate management may have interests that differ from those of other stockholders and of the Company itself. If News Corporation were to sell, or otherwise transfer, all or a large percentage of its holdings, our stock price could decline and we could find it difficult to raise capital, if needed, through the sale of additional equity securities. In addition, this concentration of ownership could delay or prevent a third party from acquiring control over us at a premium over the then-current market price of our common stock.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes and changes in the market values of our investments. Our exposure to market rate risk for changes in interest rates relates primarily to our investment account. We have not used derivative financial instruments in our investment portfolio. We invest a majority of our excess cash in funds maintained with several high-credit quality financial institutions. We also invest in debt instruments of the U.S. government and its agencies and high-quality corporate issuers and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve our invested funds by limiting default, market and reinvestment risk. Investments in fixed rate interest-earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities that have declined in fair value due to changes in interest rates.

ITEM 4.

CONTROLS AND PROCEDURES

Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures as of September 30, 2007 pursuant to Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of September 30, 2007 in ensuring that material information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act has been made known to them in a timely fashion. There has been no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II—OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Footnote 3 to the Condensed Consolidated Financial Statements—Unaudited is incorporated herein by reference.

ITEM 1A.

RISK FACTORS

See “Certain Risks Affecting Business, Operating Results and Financial Conditions” beginning on page 23, which is incorporated by reference.

ITEM 6.

EXHIBITS

Exhibits


10.1		Form of Change of Control Agreement *

10.2		Form of Transaction Bonus Letter*

31.1		CEO Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

31.2		CFO Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

32.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Incorporated by reference to the Current Report on Form 8-K filed by the Company with the SEC on August 17, 2007.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	GEMSTAR-TV GUIDE INTERNATIONAL, INC.
	(Registrant)

Date: November 1, 2007	By:	/s/ Bedi A. Singh
		Bedi A. Singh
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. junior Avg

Gemstar TV Guide International (GMST) Inactive 10-Q2007 Q3 Quarterly report

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