- 1. MacrovisionCorporation Financial Analysis Fin419 Jimmy Kinn
March 28, 2006
2. Outline
3. Company Facts
- Headquartered in Santa Clara, California
- Macrovision is traded on the Nasdaq National Market under the
symbol MVSN
- Market leader in content protection, software licensing and
installation, and digital rights management (DRM) technologies
- Alfred J. Amoroso President/Chief Executive Officer
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- Beforehand Amoroso was president and chief executive officer at
CrossWorlds Software.
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- Prior to CrossWorlds, Amoroso was general manager of IBM Global
Services Asia Pacific.
4. Company Facts Continued
- Delaware corporation founded in 1983
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- Started in video copy protection
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- Still a leading revenue generator
- License driven business model
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- Generates recurring revenues by licensing the use of its
patented technologies
5. Company Facts Continued
- Revenues last year:$203 million
- Net Income last year:$23 million
- Broad Range of Products and Services
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- Macrovision'sContent Value Managementsolutions for the
entertainment industries help content owners, software publishers
and system operators maximize the value of their content and
digital products distributed via packaged media, online and across
cable/satellite and IP networks.
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- MacrovisionsSoftware Value Managementsolutions for the software
industry help software publishers, vendors and enterprises maximize
the value of their software.
- Financial Year End: December 31 st
6. Industry Overview
- Business Software & Services
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- The design, distribution, and protection all forms of digital
content and software are experiencing an unprecedented amount of
change.
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- Entertainment content: with the expansion of high-bandwidth
internet infrastructure and the industry shift to digital media,
PC-based entertainment platforms, digital portable devices,
Internet downloads and the proliferation of peer-to-peer file
sharing networks, content and copyright owners are increasingly
vulnerable to unauthorized use of their content.
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- Increased sales of inexpensive, easy to use in-home copying
devices, such as VCRs, CD and DVD recorders, and PC based hard
drive recorders, consumers have the ability to make unauthorized
copies of video, audio and software content.
7. Industry Regulation
- Legislative and Regulatory Actions
- A number of government and legislative initiatives have been
enacted in recent years to encourage development and implementation
of technologies that protect the rights and intellectual property
of the content owners.
- In the United States, Congress enacted the Digital Millennium
Copyright Act (DMCA) in October 1998. This law required all VCRs to
comply with analog copy protection technologies that are in
widespread use, such as those covered in our patents, beginning in
May 2000.
- Europe and Japan have followed with this policy
8. Industry Regulation
- The Internet Tax Freedom Act, or ITFA, which Congress extended
until November 2007, among other things, imposed a moratorium on
discriminatory taxes on electronic commerce. The imposition by
state and local governments of various taxes upon Internet commerce
could create administrative burdens for MVSN and could decrease our
future sales.(10-K)
9. Portfolio Position
- Bought 200 shares of MVSN on April 3, 2000
- Since inception it has produced a annual return of:-19.26%
- Total Loss of:-$10,792.00which is representing a total return
of-71.95%
- Reviewed on November 2004 (Hold)
- % of Portfolio (market): 1.2%
10. Business Strategy
- Strategy is to license technologies to third parties that
manufacture products or software incorporating their
technologies.
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- InstallShield products which are mostly distributed on CD-ROMs
as boxed software, contract with outside replicators to produce,
package, and fulfill orders.
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- Manufacturing operations are limited to low volume video and
audio content security processors used by third party replicators
that require in-house system integration and quality control
efforts.
11. Customers
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- Major Hollywood studios and independent video producers
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- Hardware and software vendors
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- Consumer electronic firms
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- PC and digital set-top box manufacturers
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- Digital pay-per-view (PPV) and video-on-demand (VOD)network
operators
- Largest Customer: The Motion Picture Association of America
(MPAA) studios
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- Use the video copy protection technology to protect movie
releases on videocassette or DVD
- In addition, 43%, 42%, and 42% of the Companys sales in 2005,
2004, and 2003, respectively, are from export or foreign
operations.
12. Competitors
- DIRECT COMPETITOR COMPARISON
- MarketCap:1.08B1.32B73.58M
- Qtrly Rev Growth(yoy):2.30%15.20%14.90%
- Revenue (ttm):203.23M325.06M51.72M
- Gross Margin (ttm):89.25%69.78%55.46%
- EBITDA (ttm):64.60M-10.25M2.42M
- Oper Margins (ttm):23.15%-7.73%4.68%
- Net Income (ttm):22.11M312.35M41.28K
- PEG (5 yr expected):1.350.341.32
13. Competitors
- Video content security solutions are proprietary and have broad
U.S. and international patent coverage.
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- No significant analog video content security competitors. MVSN
has only analog content security solution that has been widely
deployed on commercial products. (10-K)
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- Limited number of direct competitors in the audio copy
protection and rights management market, including SunnComm (Market
Cap: 687.22K ), Sony, First4Internet and Settec, with Sony having
substantially greater financial resources.
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- MVSN has significant market share of the CDs produced worldwide
to which audio CD content security has been applied.
- Microsoft announced release of its Windows Media Data Session
Toolkit that can to be deployed independently of MVSN
solutions.
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- Announcement included SunnComm as the first company to
integrate a third party music CD content security technology with
Microsofts WMDST.
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- SunnComm uses technology that is competitive with MVSN
TotalPlay CD technologies. MVSN has a non-exclusive agreement with
Microsoft to allow their Windows Media Player and WMDST to
interoperate with MVSN TotalPlay CD solution.
14. Competitors
- Limited number of competitors in our SafeDisc Advanced consumer
software content protection market, including Sony SecuROM,
StarForce Technologies, Settec and Smarte Solutions.
- Small number of competitors to ActiveMARK for the protection
and digital distribution of games online, including Boonty, Oberon
and Real Networks RealArcade.
- Primary competition in the electronic license management market
comes from customers and prospects that develop their own homemade
solutions.
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- More traditional competitors in various subcomponents of
offerings, including SafeNet (who acquired Rainbow Technologies,
and has a license
15. Stock Facts for MVSN
- Share price: $21.04 (52-Week range $14.84-$24.33)
- MVSN has never paid a dividend
- Industry:Business Software & Services
- % held by Insiders: 2.97%
- % held by Institutions: 94.40%
- Shares Outstanding: 51.0 million
16. Stock Performance
- 8 Year (max) MVSN performance against Nasdaq
17. Stock Performance
- 2 year MVSN performance against the Nasdaq
18. Stock Performance vs. competitors in last 2 years 19.
Valuation
20. Sensitivity Analysis 28.51 34.63 44.81 59.1 65.14 126.06 9
24.34 28.43 34.52 41.89 44.66 64.89 125.54 8.5 21.39 24.29 28.35
32.84 34.42 44.51 64.65 8 19.16 21.34 24.24 27.25 28.27 34.31 44.36
7.5 17.43 19.13 21.3 23.46 24.18 28.2 34.21 7 16.05 17.41 19.09
20.72 21.25 24.12 28.12 6.5 GROWTH 14.92 16.03 17.38 18.65 19.06
21.21 24.06 6 13.97 14.91 16.01 17.03 17.35 19.02 21.16 5.5 13.18
13.96 14.88 15.72 15.98 17.32 18.99 5 12.49 13.17 13.95 14.65 14.87
15.96 17.3 4.5 11.9 12.48 13.16 13.75 13.94 14.85 15.94 4 11.5 11
10.5 10.11 10 9.5 9 WACC 21. Recommendation
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- Nature of the Industry (highly competitive)
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- Industry Regulations (Federal Government)
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- Macrovisions business advantage over competitors
- Recommendation to Hold all 200 shares