MACROVISION BY JEREMY SMITH SAJAL ROHATGI

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MACROVISION BY JEREMY SMITH SAJAL ROHATGI SWECHHA JAIN November 15, 2007

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Transcript of MACROVISION BY JEREMY SMITH SAJAL ROHATGI

Page 1: MACROVISION BY JEREMY SMITH SAJAL ROHATGI

MACROVISION

BY

JEREMY SMITH

SAJAL ROHATGISWECHHA JAINNovember 15, 2007

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Agenda

Company Overview Industry Overview Business Risk Recent News RCMP Competitors Valuation Conclusion

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Overview

Offer content protection, digital rights management, and software licensing solutions

Founded in 1983 and is now headquartered in Santa Clara, CA.

Publicly traded company on the NASDAQ under the ticker symbol MVSN

Currently trading at $26.72

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Macrovision Lines of Business

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Customers of Macrovision1. Motion picture studios and record labels2. Software publishers3. Hardware manufacturers 4. Consumer electronic firms5. Personal computer manufacturers6. Digital set-top box manufacturers7. Digital PPV and VOD network operators8. Publication companies9. Enterprise information technology

organizationsMacrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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3 Major Customer Groups

1. Entertainment and Content Producers and Distributors

2. Software Publishers

3. Enterprise End-Users

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Entertainment Content Producers and Distributors

Video Technology Packaged Media Solutions

Analog Copy Protection “ACP” allows customers to use stored content and deter them from making illegal copies

Used by almost every DVD player, VCR, DVD recorder, DVD drive and PC to make sure that ACP DVDs and VHS are properly recognized

Inclusion of RipGuard DVD technology

PPV and VOD solutions View programming through Cable, Satellite, or Internet Macrovision content security widely used in digital set-top boxes to

prevent VHS and DVD copies ACP technology solutions in 249 million digital boxes and DVRs world

wide

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Entertainment Content Producers and Distributors Continued Peer-To-Peer File Sharing Solutions

Hawkeye protects against illegal acquisition of secured content via P2P servers

PC Games Technology Digital distribution of gaming network Protection of CD/DVD-ROM and digital game content from

unauthorized copying SafeDisc used to authenticate media ActiveMark secures content for online distribution

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Software Publishers

FLEXnet publisher Electronically manage software licenses and guard against

unauthorized use Allows customers a broad choice of pricing and licensing models

(subscription- and usage-based) Monitor compliance with license agreement

Software Services Use of Right products to add value RightAccess enhances administrative control RightCommerce handles billing strategies

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Enterprise End Users

Software enables organizations to effectively manage licensed software usage among end-users

FLEXnet Manager Gathers and analyzes software usage data Allocate software-related costs to different departments or

projects

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Industry Overview

Increasing need for companies to protect digital content Growth of high-bandwidth internet, file sharing

servers, and shift to digital media has copyright owners vulnerable to unauthorized use

Easily accessible in-expensive copying devices are allowing for billions of dollars in loss related to piracy of products

At the same time consumers are demanding simple and flexible software solutions

Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar

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Business Risk

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Recent News

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Stock Chart : April 00 – Nov 07

Source: Yahoo Finance: http://finance.yahoo.com/charts#chart8:symbol=mvsn;range=20000313,20071109;charttype=line;crosshair=on;logscale=on;source=undefined

Highest price since 2000 : $108.25 on 30th Aug 2000 Lowest price since 2000 : $ 9.81 on 29th July on 2002

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Stock Vs S&P 500

Source: Yahoo Finance: http://finance.yahoo.com/charts#chart10:symbol=mvsn;range=1y;compare=^gspc;charttype=line;crosshair=on;logscale=on;source=undefined

S&P in 1 year : Gained 11% MVSN: Lost 8%

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Key Statistics

Closing as on 14th Nov 2007: $26.72 52 Week High Low: $21.81 - $ 30.95 Market Cap: 1462.71Million P/E Ratio: 37.78 P/Sales: 5.91 P/Book: 3.03 EPS : .72

Source: Wall Street Journal: http://online.wsj.com/quotes/ratios.html?mod=2_0460&symbol=mvsn&news-symbol=MVSN

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RCMP Position

Total value of portfolio as of 14th Nov 2007 is $381692.70 3.5% MVSN constitutes of

200 shares bought in April’00 @ 75 per share 300 Shares bought in April’07 @ 25.04 per share

34.20%

5.49%

11.65%9.23%0.96%

10.20%

2.79%

5.37%

MVSN3.5%

6.03%

5.37%

5.21%

Percentage in Portfolio

Cash

AEE

AEO

CPRT

DFS

FR

JKHY

KMB

MVSN

SRCL

SRZ

WAG

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RCMP Position

Net Gain: $ 100657 Total Loss : $11091.23 Loosing $9656 on our original 200 shares

AEE, 0.92%

AEO, 34.07%

CPRT, 27.24%

DFS, -0.25%

FR, 14.15%

JKHY, 6.99%KMB, 1.33%

MVSN, -9.09%

SRCL, 19.00%

SRZ, -1.68%WAG, 7.33%

Profit and Loss

MVSN, 82.52%

DFS, 2.23%

SRZ, 15.26%

Contribution to Loss

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PeersIndustry Product Main Competitors

Video TechnologyAnalog Content ProtectionRip GuardHawkeye

Microsoft, Apple, Real networks, IBM, Sony

Music TechnologyAnalog Content ProtectionTotal Play CDHawkeyeDigital Rights Management

Sunncom, Sony, Microsoft, Settec

PC Games Analog Content ProtectionHawkeyeTrymediaActivemark

Sony, Real networks, Smart solutions

Software Publishers Flexnet PublisherFlexnet ConnectInstall Shield

SafeNet, Microsoft, IBM, Sun

Enterprise End-Users

Flexnet PublisherFlexnet ConnectFlexnet Admin studioInstall Shield

Altiris, Computer Associates, IBM

Information Publishers

eMeta IBM, Oracle

Source : One source

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VALUATION

DCF VALUATION Assumptions WACC Share Price Range

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ASSUMPTIONS

Revenue –Volatile Past and same is expected in future.

SG&A – to increase year on year in real term.

R&D – to increase on year on year. General and Administrative Expenses –

to increase year on year basis. Capex- As reported in 10-k report. Tax Rate – Nominal Tax Rate of 35%

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WACC

Beta – Yahoo Finance – 1.34 (3 yr monthly returns) Regression with S&P500 – 1.15 (3yr weekly

returns) Bloomberg - 1

Beta = 1.24

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WACC

CAPM Risk Free Rate – 4.26% Market Premium – 5.75% Beta – 1.24 Cost of Equity -11.38% E/V – 86% Cost of Debt – 2.41% D/V – 14% Tax Rate 35% WACC – 10%

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Sensitivity Analysis

Sustainable Growth

  2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%

9.00% 23.75 25.56 27.68 30.18 33.18 36.84 41.42

10.00% 19.99 21.32 22.83 24.58 26.62 29.03 31.92

WACC 11.00% 17.09 18.09 19.22 20.50 21.96 23.65 25.61

12.00% 14.78 15.56 16.43 17.39 18.48 19.72 21.12

13.00% 12.90 13.52 14.20 14.95 15.79 16.72 17.77

14.00% 11.35 11.85 12.39 12.99 13.65 14.37 15.18

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DCF Share Value

Assumptions DCF Share Price

We assume volatility in Revenue (Base Case) 25-27

  

Following Management Guidance for year on year revenue growth of 25% - 30% 30-32

  

The Company need to grow at 35% year on year to achieve the break even price 45.02

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Conclusion

Sell 200 Shares Vs.Purchase April 3, 2000 @ Market Price (retain 300 purchased April 2007)

Added benefit of Tax Shielding.

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QUESTIONS?