Gemstar Swings to Profit on Lower Costs, Tax Benefit

Gemstar-TV Guide International Inc., the publisher of TV Guide magazine, said Thursday that it earned $42 million in the second quarter because of lower costs and an income tax benefit. Revenue slipped 0.8%.

Net income was 10 cents a share, compared with a net loss of $22.5 million, or 6 cents, a year earlier, the Los Angeles-based company said. Revenue fell to $179.1 million from $180.6 million, Gemstar spokeswoman Christine Levesque said.

Gemstar said stock compensation, depreciation and amortization costs declined 84% to $8.9 million in the quarter. The year-earlier period included expenses related to the departure of two top executives. Gemstar also booked a $23.3-million income tax benefit in the latest period.

“The significant drop in income tax because of Internal Revenue procedures created a tax benefit for us in 2004,” Gemstar Chief Executive Jeff Shell said in a conference call.

Changes made by the Internal Revenue Service helped cut Gemstar’s effective tax rate to about 37% for the six months ended June 30 from about 152% in the three months ended March 31, Gemstar said in a regulatory filing.

TV Guide, the top-selling U.S. weekly magazine, continued to lose subscribers and advertisers as it competed with free TV program guides offered by newspapers and cable and satellite-TV services.

“The TV Guide magazine business continues to be an area of intense focus for us, and while the number of subscribers rose, revenue fell in part because of promotions,” Shell said. “We expect customers will resubscribe at higher rates, but sales will be soft for the remainder of the year.”

Revenue for the company’s publishing business dropped to $95.1 million from $107.1 million a year earlier because TV Guide’s circulation revenue declined.

Shell has cut costs by settling lawsuits related to accounting misstatements. He has also settled patent disputes over technology that Gemstar provides to cable companies and consumer-electronics makers.

Gemstar shares rose as much as 34 cents to $4.64 in extended trading, after the company announced its quarterly results. Earlier, the shares fell 13 cents to $4.30 on Nasdaq. They have dropped 15% this year through the Nasdaq close.

Gemstar agreed in June to pay $10 million to settle allegations by the Securities and Exchange Commission that it had overstated revenue by $250 million from 1999 through 2002.