macrovision by jeremy smith sajal rohatgi swechha jain november 15, 2007
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MACROVISION
BY
JEREMY SMITH
SAJAL ROHATGISWECHHA JAINNovember 15, 2007
Agenda
Company Overview Industry Overview Business Risk Recent News RCMP Competitors Valuation Conclusion
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
Macrovision Lines of Business
Macrovision (2006). Annual Report 2006. Retrieved November 10, 2007, from SEC EDGAR database http://sec.gov/edgar
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
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
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
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
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
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
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
Business Risk
Recent News
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
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%
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
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
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
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
VALUATION
DCF VALUATION Assumptions WACC Share Price Range
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%
WACC
Beta – Yahoo Finance – 1.34 (3 yr monthly returns) Regression with S&P500 – 1.15 (3yr weekly
returns) Bloomberg - 1
Beta = 1.24
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%
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
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
Conclusion
Sell 200 Shares Vs.Purchase April 3, 2000 @ Market Price (retain 300 purchased April 2007)
Added benefit of Tax Shielding.
QUESTIONS?
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