Rovi Corporation Reports Second Quarter Financial Performance

Santa Clara, California, UNITED STATES


SANTA CLARA, Calif., Aug. 6, 2009 (GLOBE NEWSWIRE) -- Rovi Corporation (Nasdaq:ROVI), formerly known as Macrovision Solutions Corporation, announced today, on a GAAP basis, second quarter 2009 revenues of $119.5 million, compared to $73.1 million for the second quarter of 2008. Second quarter 2009 GAAP net loss was $2.1 million compared to a net loss from continuing operations of $10.8 million for the second quarter of 2008. GAAP net loss for the second quarter 2009 included $20.4 million of intangible asset amortization and $45.6 million restructuring and impairment charges primarily related to the write-down of various acquired brand names, including those acquired along with Gemstar-TV Guide International, Inc. (Gemstar), which will be replaced with the Rovi brand. GAAP diluted earnings per share for the quarter was a loss of $0.02 compared to a loss per share from continuing operations of $0.13 for the second quarter of 2008.

As management believes that including Gemstar's operating results only for the period since its acquisition on May 2, 2008 diminishes the comparative value of results from the prior year, management believes it is useful to measure the results on a non-GAAP Adjusted Pro Forma basis, assuming the Gemstar acquisition was consummated on January 1, 2007. The Adjusted Pro Forma results exclude Rovi's Software and Games businesses, which were sold on April 1, 2008; the eMeta business, which was sold on November 14, 2008; the TV Guide Magazine business, which was sold on December 1, 2008; the TVG Network business, which was sold on January 27, 2009; and the TV Guide Network and TV Guide Online businesses, which were sold on February 28, 2009. On this basis, second quarter 2009 Adjusted Pro Forma Revenues were $119.5 million, compared to $101.7 million for the second quarter of 2008. Second quarter 2009 Adjusted Pro Forma Earnings Per Share were $0.38, compared to $0.14 for the second quarter of 2008. Adjusted Pro Forma Earnings Per Share are calculated using Adjusted Pro Forma Income from Continuing Operations. Adjusted Pro Forma Income from Continuing Operations is defined as pro forma income from continuing operations, adding back non-cash items such as equity-based compensation, amortization of intangibles, amortization of debt issuance costs, non-cash interest expense recorded under FSP APB 14-1 and the reversals of discrete tax reserves; as well as items which impact comparability that are required to be recorded under GAAP, but that the Company believes are not indicative of its core operating results such as transaction, transition and integration costs, restructuring and asset impairment charges, insurance settlements and gains or losses on sales of strategic investments. While depreciation expense is a non-cash item, it is included in Adjusted Pro Forma Income from Continuing Operations as a reasonable proxy for capital expenditures. Reconciliations between pro forma revenues and Adjusted Pro Forma Revenues and between pro forma operating income from continuing operations and Adjusted Pro Forma Income from Continuing Operations are provided in the tables below.

"Q2 was an outstanding quarter across all elements of our business notwithstanding the economy. We grew Adjusted Pro Forma revenues 18% year over year in the second quarter driven by growth in CE licensing, increases in the number of digital television subscribers, new licensees and increased data penetration," said Fred Amoroso, President and CEO of Rovi. "I'm encouraged by the continued execution of our business plan, as demonstrated by key wins across the business, including recent international service provider agreements, key wins for our emerging CE solutions, and growth in the data licensing space."

"Given our strong first half results, we are raising and narrowing our 2009 revenue estimates from a range of between $450 and $480 million to a range of between $465 and $485 million," added James Budge, Chief Financial Officer. "Additionally, we are raising and narrowing our 2009 Adjusted Pro Forma earnings per share estimates from a range of between $1.25 and $1.45 to a range of between $1.40 and $1.50."

GAAP to Adjusted Pro Forma Reconciliation

Rovi Corporation provides non-GAAP or Adjusted Pro Forma information. References to Adjusted Pro Forma information are to non-GAAP pro forma measures. The Company provides Adjusted Pro Forma financial information to assist investors in assessing its current and future operations in the way that its management evaluates those operations. Adjusted Pro Forma Revenue, Adjusted Pro Forma Income from Continuing Operations and Adjusted Pro Forma Earnings Per Share are supplemental measures of the Company's performance that are not required by, and are not presented in accordance with GAAP. The Adjusted Pro Forma information does not substitute for any performance measure derived in accordance with GAAP, including, but not limited to, GAAP basis pro forma information. Rovi Corporation believes that providing Adjusted Pro Forma financial information is useful to investors. Adjusted Pro Forma financial information assumes the Gemstar acquisition, all divestitures, and discontinued operations and product lines were effective on January 1, 2007. Additionally, the TVG Network, TV Guide Network and TV Guide Online businesses are assumed to have been sold for aggregate proceeds of $275 million which is assumed to have reduced the debt issued in conjunction with the acquisition of Gemstar. Further, Adjusted Pro Forma Income from Continuing Operations and Adjusted Pro Forma Earnings Per Share exclude the effect of non-cash items and items which impact comparability that are required to be recorded under GAAP, but that the Company believes are not indicative of its core operating results, or that the Company expects to be incurred over a limited period of time. While depreciation expense is a non-cash item, it is included in Adjusted Pro Forma Income from Continuing Operations as management considers it a proxy for capital expenditures.

As a result of the Gemstar acquisition, the Company's management now evaluates and makes operating decisions about its business operations primarily based upon Adjusted Pro Forma Revenue, Adjusted Pro Forma Income from Continuing Operations and Adjusted Pro Forma Earnings Per Share. Management uses Adjusted Pro Forma Income from Continuing Operations and Adjusted Pro Forma Earnings Per Share as measures as they exclude amortization of intangibles, amortization of debt issuance costs, non-cash interest expense recorded under FSP APB 14-1, the reversals of discrete tax reserves, equity-based compensation, transaction costs, transition and integration costs, restructuring and asset impairment charges, insurance settlements and gains or losses on sales of strategic investments; items management does not consider to be "core costs" when making business decisions. Therefore, management presents these Adjusted Pro Forma financial measures along with GAAP measures. The income statement line items impacted in the adjustment from GAAP to the Adjusted Pro Forma presentation in this earnings release are cost of revenues; research and development; selling, general and administrative; amortization; restructuring and asset impairment charges; interest expense; gain on sale of strategic investments and income tax (benefit) expense.

For each such Adjusted Pro Forma financial measure, the adjustment provides management with information about the Company's underlying operating performance that enables a more meaningful comparison of its financial results in different reporting periods. For example, since Rovi Corporation does not acquire businesses on a predictable cycle, management excludes amortization of intangibles from acquisitions in order to make more consistent and meaningful evaluations of the Company's operating expenses. Management also excludes the effect of restructuring and asset impairment charges, insurance settlements and gains or losses on sales of strategic investments for the same reason. Management excludes discontinued product lines as it believes this exclusion is as meaningful for comparability purposes as excluding the results from a business that meets the criteria to be classified as discontinued operations on a GAAP basis. Management excludes the impact of equity-based compensation to help it compare current period operating expenses against the operating expenses for prior periods and to eliminate the effects of this non-cash item, which, because it is based upon estimates on the grant dates may bear little resemblance to the actual values realized upon the future exercise, expiration, termination or forfeiture of the stock-based compensation, and which, as it relates to stock options and stock purchase plan shares, is required for GAAP purposes to be estimated under valuation models, including the Black-Scholes model used by Rovi Corporation.

Management uses these Adjusted Pro Forma measures to help it make budgeting decisions between those expenses that affect operating expenses and operating margin (such as research and development and sales, general and administrative expenses), and those expenses that affect cost of revenue and gross margin. Further, Adjusted Pro Forma financial information helps management track actual performance relative to financial targets. Making Adjusted Pro Forma financial information available to investors, in addition to GAAP financial information, may also help investors compare the Company's performance with the performance of other companies in our industry, which may use similar financial measures to supplement their GAAP financial information.

Management recognizes that the use of Adjusted Pro Forma measures has limitations, including the fact that management must exercise judgment in determining which types of charges should be excluded from the Adjusted Pro Forma financial information. Because other companies, including companies similar to Rovi Corporation, may calculate their non-GAAP financial measures differently than the Company calculates its Adjusted Pro Forma measures, these Adjusted Pro Forma measures may have limited usefulness in comparing companies. Management believes, however, that providing this Adjusted Pro Forma financial information, in addition to the GAAP financial information, facilitates consistent comparison of the Company's financial performance over time. The Company has provided Adjusted Pro Forma financial information to the investment community, not as an alternative, but as an important supplement to GAAP financial information; to enable investors to evaluate the Company's core operating performance in the same way that management does. Reconciliations between pro forma revenues and Adjusted Pro Forma Revenues and between pro forma combined company operating income from continuing operations and Adjusted Pro Forma Income from Continuing Operations are provided in the tables below.

Dial-in Information

Rovi Corporation will hold an investor conference call at 4:30 p.m. Eastern time on August 6, 2009. Investors and analysts interested in participating in the conference are welcome to call 877-941-2927 (or international +1 480-629-9725) and reference the Rovi call.

The conference call can also be accessed via live webcast at www.rovicorp.com or www.earnings.com (www.streetevents.com for subscribers) on August 6, 2009 at 4:30 p.m. Eastern time. The on-demand audio webcast of the earnings conference call will be made available as soon as practicable after the live webcast ends.

A replay of the conference call will be available through August 10, 2009 and can be accessed by calling 800-406-7325 (or international +1 303-590-3030) and entering passcode 4116686#. A replay of the audio webcast will be available on Rovi Corporation's website approximately 1-2 hours after the live webcast ends and will remain on Rovi Corporation's website until our next quarterly earnings call.

About Rovi Corporation

Rovi Corporation is focused on revolutionizing the digital entertainment landscape by delivering solutions that enable consumers to intuitively discover new entertainment from many sources and locations. The company also provides extensive entertainment discovery solutions for television, movies, music and photos to its customers in the consumer electronics, cable and satellite, entertainment and online distribution markets. These solutions, complemented by a leading collection of entertainment data, create the connections between people and technology, and enable them to discover and manage entertainment in an enjoyable form.

Rovi Corporation holds over 4,000 issued or pending patents and patent applications worldwide. It is headquartered in Santa Clara, California, with numerous offices across the United States and around the world including Japan, Hong Kong, Luxembourg, and the United Kingdom. More information about Rovi Corporation can be found at www.rovicorp.com.

The Rovi Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6482

All statements contained herein, including the quotations attributed to Mr. Amoroso and Mr. Budge, that are not statements of historical fact, including statements that use the words "will," "believes," "anticipates," "estimates," "expects," "intends" or "looking to the future" or similar words that describe the Company's or its management's future plans, objectives, or goals, are "forward-looking statements" and are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the Company's estimates of future revenues and earnings, business strategies, and future opportunities for product, market or customer expansion.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. Such factors included, among others, the Company's ability to successfully execute on its strategic plan and customer demand for and industry acceptance of the Company's technologies and integrated solutions. Such factors are further addressed in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2009 and such other documents as are filed with the Securities and Exchange Commission from time to time (available at www.sec.gov). The Company assumes no obligation, except as required by law, to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.



 ROVI CORPORATION
 GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 (UNAUDITED)

                             Three Months Ended     Six Months Ended
                                  June 30,              June 30,
                            --------------------  --------------------
                               2009       2008       2009       2008
                            ---------  ---------  ---------  ---------

 Revenues                   $ 119,478  $  73,054  $ 230,636  $ 103,349

 Costs and expenses:
  Cost of revenues             15,294     12,585     30,464     16,518
  Research and development     23,009     16,952     46,033     22,025
  Selling, general and
   administrative              32,248     30,572     64,379     45,240
  Depreciation                  4,482      3,653      9,031      4,457
  Amortization                 20,403     15,033     40,662     18,098
  Restructuring and asset
   impairment charges          45,648         --     53,619         --
                            ---------  ---------  ---------  ---------
  Total costs and expenses    141,084     78,795    244,188    106,338
                            ---------  ---------  --------- ----------

 Operating loss from
   continuing operations      (21,606)    (5,741)   (13,552)    (2,989)
  Interest expense            (13,589)   (13,424)   (31,167)   (17,442)
  Interest income and other,
   net                          1,370      2,493      2,825      8,099
  Gain on sale of strategic
   investments                     --         --         --      5,238
                            ---------  ---------  ---------  ---------
 Loss from continuing
  operations before income
  taxes                       (33,825)   (16,672)   (41,894)    (7,094)
 Income tax benefit           (31,854)    (5,867)   (34,578)    (3,711)
                            ---------  ---------  ---------  ---------
 Loss from continuing
  operations, net of tax       (1,971)   (10,805)    (7,316)    (3,383)
 Discontinued operations,
  net of tax                     (171)    95,458    (36,341)    93,066
                            ---------  ---------  ---------  ---------
 Net (loss) income          $  (2,142) $  84,653  $ (43,657) $  89,683
                            =========  =========  =========  =========

 Basic and diluted (loss)
  income per share:
  Loss per share from
   continuing operations    $   (0.02) $   (0.13) $   (0.07) $   (0.05)

  (Loss) income per share
   from discontinued
   operations               $      --  $    1.12  $   (0.37) $    1.35
                            ---------  ---------  ---------  ---------
 Net (loss) income per
  share                     $   (0.02) $    0.99  $   (0.44) $    1.30
                            =========  =========  =========  =========

 Shares used in computing
  basic and diluted net
  (loss) income per share     100,314     85,165    100,219     68,977
                            =========  =========  =========  =========


 ROVI CORPORATION
 GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
 (IN THOUSANDS)
 (UNAUDITED)

                                ASSETS

                                               June 30,    December 31,
                                                2009           2008
                                             -----------   -----------
 Current assets:
  Cash and cash equivalents                  $   171,977   $   199,188
  Short-term investments                         138,223        77,914
  Restricted cash                                 36,793            --
  Trade accounts receivable, net                  87,438        84,020
  Deferred tax assets, net                        44,336        29,537
  Prepaid expenses and other current assets       10,673        12,053
  Assets held for sale                                --       329,522
                                             -----------   -----------
   Total current assets                          489,440       732,234
 Long-term marketable securities                  20,952        84,955
 Property and equipment, net                      39,625        45,352
 Finite-lived intangible assets, net             817,766       895,071
 Other assets                                     44,458        50,387
 Goodwill                                        848,219       828,185
                                             -----------   -----------
                                             $ 2,260,460   $ 2,636,184
                                             ===========   ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
  Accounts payable and accrued expenses      $    73,382   $    85,686
  Taxes payable                                    6,871         8,996
  Deferred revenue                                22,915        14,376
  Current portion of debt and capital lease
   obligations                                        --         5,842
  Liabilities held for sale                           --        56,021
                                             -----------   -----------
   Total current liabilities                     103,168       170,921
 Taxes payable, less current portion              74,970        73,009
 Deferred tax liability, net                         755         9,914
 Long-term debt and capital lease
  obligations, less current portion              575,263       855,160
 Deferred revenue, less current portion            3,865         4,909
 Other non current liabilities                    13,947         7,076
                                             -----------   -----------
                                                 771,968     1,120,989
 Stockholders' equity:
  Common stock                                       103           103
  Treasury stock                                 (25,068)      (25,068)
  Additional paid-in capital                   1,617,702     1,602,667
  Accumulated other comprehensive loss            (2,960)       (4,879)
  Accumulated deficit                           (101,285)      (57,628)
                                             -----------   -----------
   Total stockholders' equity                  1,488,492     1,515,195
                                             -----------   -----------
                                             $ 2,260,460   $ 2,636,184
                                             ===========   ===========


 ROVI CORPORATION
 ADJUSTED PRO FORMA RECONCILIATION
 (IN THOUSANDS)
 (UNAUDITED)
                                         Three Months Ended
                                           June 30, 2009
                              ----------------------------------------

                                 GAAP                       Adjusted
                              Pro Forma(9)   Adjustments    Pro Forma
                              ------------  ------------  ------------
 Revenues:
  Consumer Electronics
   Manufacturers(1)           $     47,938  $         --  $     47,938
  Service Providers(1)              58,587            --        58,587
  All Other                         12,953            --        12,953
                              ------------  ------------  ------------
                                   119,478            --       119,478
 Costs and expenses:
  Cost of revenues(2)               15,294          (528)       14,766
  Research and Development(3)       23,009        (1,024)       21,985
  Selling, general and
   adminstrative(4)                 32,248        (4,737)       27,511
  Depreciation(5)                    4,482                       4,482
  Amortization                      20,403       (20,403)           --
  Restructuring and asset
   impairment charges(6)            45,648       (45,648)           --
                              ------------  ------------  ------------
 Total costs and expenses          141,084       (72,340)       68,744
                              ------------  ------------  ------------
 Operating (loss) income from
  continuing operations            (21,606)       72,340        50,734
 Interest (expense) and
  other, net(7)                    (11,127)        4,263        (6,864)
                              ------------  ------------  ------------
 (Loss) income from continuing
  operations before taxes          (32,733)       76,603        43,870
 Income tax (benefit)
  expense(8)                       (31,487)       36,313         4,826
                              ------------  ------------  ------------
 (Loss) income from
  continuing operations       $     (1,246) $     40,290  $     39,044
                              ============  ============  ============
 Diluted (loss) income per
  share from continuing
  operations                  $      (0.01)               $       0.38
                              ============                ============
 Share used in computing
  diluted (loss) income per
  share                            100,314                     101,019
                              ============                ============


                                        Three Months Ended
                                           June 30, 2008
                              ----------------------------------------

                                 GAAP                       Adjusted
                               Pro Forma     Adjustments    Pro Forma
                              ------------  ------------  ------------
 Revenues:
  Consumer Electronics
   Manufacturers(1)           $     39,906            --  $     39,906
  Service Providers(1)              49,532            --        49,532
  All Other                         12,219            --        12,219
                              ------------  ------------  ------------
                                   101,657            --       101,657
 Costs and expenses:
  Cost of revenues(2)               14,912          (510)       14,402
  Research and Development(3)       22,418          (846)       21,572
  Selling, general and
   adminstrative(4)                 38,928        (4,762)       34,166
  Depreciation(5)                    4,800                       4,800
  Amortization                      20,813       (20,813)           --
  Restructuring and asset
   impairment charges(6)                --            --            --
                              ------------  ------------  ------------
 Total costs and expenses          101,871       (26,931)       74,940
                              ------------  ------------  ------------
 Operating (loss) income from
  continuing operations               (214)       26,931        26,717
 Interest (expense) and
  other, net (7)                   (11,518)        3,514        (8,004)
                              ------------  ------------  ------------
 (Loss) income from continuing
  operations before taxes          (11,732)       30,445        18,713
 Income tax (benefit)
  expense(8)                        (9,405)       13,761         4,356
                              ------------  ------------  ------------
 (Loss) income from continuing
  operations                  $     (2,327) $     16,684  $     14,357
                              ============  ============  ============
 Diluted (loss) income per
  share from continuing
  operations                  $      (0.02)               $       0.14
                              ============                ============
 Share used in computing
  diluted (loss) income per
  share                            101,743                     101,789
                              ============                ============

 (1) Service Provider revenue includes any revenue related to an IPG
 deployed by a service provider in a subscriber household regardless of
 whether the ultimate payment for that IPG comes from the service
 provider or from a manufacturer of a set-top box. IPG revenues for
 IPGs included in a set-top box deployed by a service provider where
 payment was made by the set-top box manufacturer were previously
 classified in Consumer Electronics Manufacturers. Prior period amounts
 have been reclassified to conform to the current period presentation.
 (2) Adjustments include $0.2 million and $0.2 million for equity based
 compensation and $0.3 million and $0.3 million for transition and
 integration costs in Q209 and Q208, respectively.
 (3) Adjustments include $1.0 million and $0.3 million for equity based
 compensation and $0.0 million and $0.5 million for transition and
 integration costs in Q209 and Q208, respectively. 
 (4) Adjustments to selling, general and administrative consist of the 
 following:

                                                2009          2008
                                            ------------  ------------
          Equity based compensation         $     (3,977) $     (2,606)
          Transaction costs                         (288)           (8)
          Transition and integration costs          (472)       (2,148)
                                            ------------  ------------
              Total adjustment              $     (4,737) $     (4,762)
                                            ============  ============

 (5) While depreciation is a non-cash item, it is included in Adjusted
 Pro Forma Income From Continuing Operations as management considers it
 a proxy for capital expenditures.
 (6) Adjustments eliminate $44.7 million of non-cash asset impairment  
 charges and $0.9 million of restructuring charges.
 (7) Adjustments eliminate non-cash interest expense such as amortization 
 of note issuance costs and the FSP APB 14-1 convertible note discount. 
 (8) For 2009, utilization of net operating losses result in an adjusted 
 pro forma tax rate of 11%. For 2008, tax effect adjustments at 33% and 
 eliminate discrete tax benefit of $3.6 million.
 (9) GAAP Pro Forma information is necessary in 2009 to provide
 comparative operating results. GAAP Pro Forma assumes $275 million of
 net proceeds from the sale of the Media Properties reduced the debt
 issued in conjunction with acquiring Gemstar. As such, GAAP Pro Forma
 includes a $1.1 million reduction in interest expense and a $0.4
 million reduction in tax benefit.


 ROVI CORPORATION
 ADJUSTED PRO FORMA RECONCILIATION
 (IN THOUSANDS)
 (UNAUDITED)

                                         Six Months Ended
                                           June 30, 2009
                              ----------------------------------------
                                 GAAP                       Adjusted
                              Pro Forma(9)   Adjustments    Pro Forma
                              ------------  ------------  ------------
 Revenues:
  Consumer Electronics
   Manufacturers (1)          $     94,424  $         --  $     94,424
  Service Providers(1)             111,020            --       111,020
  All Other                         25,192            --        25,192
                              ------------  ------------  ------------
                                   230,636            --       230,636
 Costs and expenses:
  Cost of revenues (2)              30,464          (788)       29,676
  Research and Development (3)      46,033        (2,053)       43,980
  Selling, general and
   adminstrative (4)                64,379        (9,184)       55,195
  Depreciation (5)                   9,031            --         9,031
  Amortization                      40,662       (40,662)           --
  Restructuring and asset
   impairment charges (6)           53,619       (53,619)           --
                              ------------  ------------  ------------
 Total costs and expenses          244,188      (106,306)      137,882
                              ------------  ------------  ------------
 Operating (loss) income from
  continuing operations            (13,552)      106,306        92,754
 Interest (expense) and other,
  net (7)                          (21,747)        7,883       (13,864)
 Gain on sale of strategic
  investments                           --            --            --
                              ------------  ------------  ------------
 (Loss) income from continuing
  operations before taxes          (35,299)      114,189        78,890
 Income tax (benefit)
  expense(8)                       (32,360)       41,038         8,678
                              ------------  ------------  ------------
 (Loss) income from continuing
  operations                  $     (2,939) $     73,151  $     70,212
                              ============  ============  ============
 Diluted (loss) income per
  share from continuing
  operations                  $      (0.03)               $       0.69
                              ============                ============
 Share used in computing
  diluted (loss) income per
  share                            100,219                     100,469
                              ============                ============


                                         Six Months Ended
                                           June 30, 2008
                              ----------------------------------------

                                  GAAP                      Adjusted
                                Pro Forma    Adjustments    Pro Forma
                              ------------  ------------  ------------
 Revenues:
  Consumer Electronics
   Manufacturers (1)          $     82,134            --  $     82,134
  Service Providers(1)              97,656            --        97,656
  All Other                         25,560            --        25,560
                              ------------  ------------  ------------
                                   205,350            --       205,350
 Costs and expenses:
  Cost of revenues(2)               29,707          (667)       29,040
  Research and Development(3)       42,124        (1,393)       40,731
  Selling, general and
   adminstrative(4)                 44,439        24,844        69,283
  Depreciation(5)                    9,594            --         9,594
  Amortization                      41,217       (41,217)           --
  Restructuring and asset
   impairment charges(6)                --            --            --
                              ------------  ------------  ------------
 Total costs and expenses          167,081       (18,433)      148,648
                              ------------  ------------  ------------
 Operating (loss) income from
  continuing operations             38,269        18,433        56,702
 Interest (expense) and
  other, net(7)                    (22,008)        6,993       (15,015)
 Gain on sale of strategic
  investments                        5,238        (5,238)           --
                              ------------  ------------  ------------
 (Loss) income from continuing
  operations before taxes           21,499        20,188        41,687
 Income tax (benefit)
  expense(8)                         1,675        10,488        12,163
                              ------------  ------------  ------------
 (Loss) income from continuing
  operations                  $     19,824  $      9,700  $     29,524
                              ============  ============  ============
 Diluted (loss) income per
  share from continuing
  operations                  $       0.19                $       0.29
                              ============                ============
 Share used in computing
  diluted (loss) income per
  share                            101,680                     101,680
                              ============                ============

 (1) Service Provider revenue includes any revenue related to an IPG
 deployed by a service provider in a subscriber household regardless of
 whether the ultimate payment for that IPG comes from the service
 provider or from a manufacturer of a set-top box. IPG revenues for
 IPGs included in a set-top box deployed by a service provider where
 payment was made by the set-top box manufacturer were previously
 classified in Consumer Electronics Manufacturers. Prior period amounts
 have been reclassified to conform to the current period presentation.
 (2) Adjustments include $0.3 million and $0.4 million for equity based
 compensation and $0.5 million and $0.3 million for transition and
 integration costs in the year to date periods ended Q209 and Q208,
 respectively.
 (3) Adjustments include $1.9 million and $0.9 million for equity based
 compensation and $0.2 million and $0.5 million for transition and
 integration costs in the year to date periods ended Q209 and Q208,
 respectively.
 (4) Adjustments to selling, general and administrative
 consist of the following:

                                                2009          2008
                                            ------------  ------------
          Equity based compensation         $     (7,562) $     (4,827)
          Transaction costs                         (617)         (681)
          Transition and integration costs        (1,005)       (2,148)
          Insurance settlement                        --        32,500
                                            ------------  ------------
              Total adjustment              $     (9,184) $     24,844
                                            ============  ============


 (5) While depreciation is a non-cash item, it is included in Adjusted
 Pro Forma Income From Continuing Operations as management considers it
 a proxy for capital expenditures.
 (6) Adjustments eliminate $44.7 million of non-cash asset impairment 
 charges and $8.9 million of  restructuring charges.  
 (7) Adjustments eliminate non-cash interest expense such as amortization 
 of note issuance costs and the FSP APB 14-1 convertible note discount. 
 (8) For 2009, utilization of net  operating losses result in an adjusted 
 pro forma tax rate of 11%. For 2008, tax effect adjustments at 33% and 
 eliminate discrete tax benefit of $3.6 million in Q208.
 (9) GAAP Pro Forma information is necessary in 2009 to provide
 comparative operating results. GAAP Pro Forma assumes $275 million of
 net proceeds from the sale of the Media Properties reduced the debt
 issued in conjunction with acquiring Gemstar. As such, GAAP Pro Forma
 includes a $6.6 million reduction in interest expense and a $2.2
 million reduction in tax benefit.


        

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