Room 4561
January 6, 2006
Mr. Shum Mukherjee
Chief Financial Officer
OpenTV Corp.
275 Sacramento Street
San Francisco, CA 94111
Re: OpenTV Corp.
Form 10-K for Fiscal Year Ended December 31, 2004
Filed March 16, 2005
Form 10-Q for the period Ended June 30, 2005
Filed August 9, 2005
File No. 000-15473
Dear Mr. Mukherjee,
We have reviewed the above referenced filing and have the
following comments. Please note that we have limited our review
to
only your financial statements and related disclosures and do not
intend to expand our review to other portions of your document. We
may ask you to provide us with supplemental information so we may
better understand your disclosure. Please be as detailed as
necessary in your explanation. After reviewing this information,
we
may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comment or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K Filed March 16, 2005
Item 7, Management`s Discussion and Analysis, page II-6
Years Ended December 31, 2004, 2003 and 2002, page II-10
1. We note that the revenue line items royalties and services,
support and other differed materially for 2004 as compared to
2003.
Your discussion of these changes provides certain information
regarding these changes. However, your discussion does not appear
to
provide business conditions or other reasons underlying the
changes,
or explain the extent to which these changes represent trends
which
you expect to continue in future periods.
For example, your discussion of changes in royalties revenue
quantifies the impact by region and indicates that the increase
was
due to increased shipments to various customers. However, your
discussion does not provide any information or insight regarding
your
understanding of the reasons why shipments increased. What do you
understand to be the reasons for the increased shipments? Have
there
been any changes in customer acceptance, market conditions,
product
mix, pricing terms or any other factors that contributed to the
increase? Do any of these factors result from or reflect trends
which you expect to continue?
Separately, your disclosure indicates that service and support
revenue decreased because of "decreased consulting work for
customers." However, your disclosure does not explain why you
believe your customers are not renewing their service contracts.
Your disclosure also does not explain the extent to which this
decrease in service and support revenue represents a trend that
will
impact future periods.
In view of these observations, explain how you have considered
Item
303(a)(3)(ii) of Regulation S-K, the instructions to Item 303(a)
of
Regulation S-K. For additional guidance, see Sections III.B.3 and
III.B.4 of SEC Release 33-8350.
2. Discussion in your MD&A indicates that, due to volume
discounts,
the average royalty payment for each copy of software licensed to
certain customers may decline in future periods. The discussion
also
suggests that these discounts may have impacted your results in
2004.
In view of this, explain how you have considered disclosing the
extent to which changes in revenues are attributable to changes in
prices or volumes. See Item 303(a)(3)(iii) of Regulation S-K.
Item 9A, Controls & Procedures, page II-31
Certain Controls Associated with the Financial Reporting and Close
Process were not Effective, page II -32
3. We note that you identify several "errors" that "required
modification" or were "subsequently corrected." Tell us the
nature
and amount of each of the errors identified. Additionally, tell
us
whether any of these errors had a material effect on quarterly or
annual periods prior to the period ended December 31, 2004.
Support
any conclusions that prior effects were not material.
Consolidated Statements of Operations, page F-4
4. We note that you separately report revenue from various
sources,
including royalties, sales of services and sales of products.
However, you report cost of revenues as a single line item.
Explain
to us why you believe this presentation of cost of revenues
complies
with the guidance Rule 5-03(b)(2) of Regulation S-X.
Notes to the Consolidated Financial Statements, page F-7
Note 3. Acquisitions, page F-14
BettingCorp Acquisition, page F-16
5. Support your accounting for the $6.9 million guarantee you
issued
to BettingCorp and the related $4.1 million you received upon
BettingCorp`s disposition in 2004 of these instruments. Tell us
what
consideration you gave to EITF 97-15 and 99-12.
Note 9. Restructuring Costs, page F-21
6. The tabular information you have provided regarding
restructuring
activities appears to include information related to a number of
separate restructuring plans. Explain how this presentation
considers the guidance provided in the interpretive response to
the
question under SAB Topic P.4.
Contingencies, page F-30
Other Matters, page F-33
7. We note your disclosure in the last sentence of this section
which
indicates that with regard to certain of your contingencies "there
exists the possibility of a material adverse impact on [your]
results
of operations...". Tell us what consideration you gave to the
disclosure requirement of paragraph 10 of SFAS 5 where there is at
least a "reasonable possibility" that a loss may have been
incurred.
You should use assessments of the likelihood of loss that are
consistent with the terms used in paragraph 3 of SFAS 5. Please
note
that, if it is at least reasonably possible that a loss exceeding
amounts already recognized may have been incurred, and the amount
of
that loss would be material, you must disclose the estimated loss,
or
range of loss, that is reasonably possible, or state that such an
estimate cannot be made. See SAB Topic 5:Y, question 2.
Note 15, Segment Information, page F-35
8. We note your general disclosure indicating that you "redefined"
your reporting units in 2004. Explain why you believe that this
brief disclosure adequately explains to readers the nature of the
changes in your business. In this regard, given the nature of
segment reporting, a change in your reported segments would appear
to
reflect, or result from, a significant change in the way your
chief
operating decision maker allocates resources or assesses
performance.
In addition to a succinct discussion here, we would expect such a
change to be discussed in adequate detail elsewhere in your
filing,
including in the business section and management`s discussion and
analysis.
9. In your segment table on page F-36 you appear to present items
or
subtotals that may not be either segment measures or reconciling
items required by paragraph 32 of SFAS 131. In this regard, we
note
that your chief operating decision maker reviews contribution
margin.
However, your presentation also includes EBITDA and adjusted
EBITDA.
To the extent you have included items or subtotals not required
under
SFAS 131 and not calculated in accordance with GAAP, each would
appear to represent a separate non-GAAP measure that must fully
comply with Item 10(e) of Regulation S-K and be accompanied by all
of
the requisite disclosures. Please tell us how your current
disclosure complies with SFAS 131 and / or Item 10(e) of
Regulation
S-K. For further guidance, see SFAS 131, par. 30.
10. Please provide us supplementally with examples of the reports
that the chief operating decision maker reviewed prior to, and
subsequent to, your change in reporting units.
Form 10-Q Filed August 9, 2005
Notes to Condensed Consolidated Financial Statements, page 5
Note 6, NASCAR and Sun Amendments, page 8
11. We note that you amended your agreement with Sun Microsystems
to
reduce your obligation and extend the term of your development and
distribution rights under the agreement. We separately note that
you
previously recorded a charge of $3.5 million in connection with
this
agreement. Explain to us how the timing of this initial charge
was
determined. Tell us whether the initial or amended agreement
provides for any royalties or other contingent payments during the
remaining term of the agreement. Additionally describe the
benefits
that you have previously received, are currently receiving, or
expect
to receive in the future as a result of the arrangement.
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Chauncey Martin, Staff Accountant, at (202)
551-3441 or me at (202) 551-3489 if you have any questions
regarding
these comments.
Very truly yours,
Brad Skinner
Accounting Branch Chief
Shum Mukherjee
OpenTV Corp.
January 6, 2006
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