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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 001-15473

OPENTV CORP.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|British Virgin Islands                                         |  | 98-0212376                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|275 Sacramento Street San Francisco, California                |  | 94111                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(415) 962-5000

(Registrants telephone number, including area code)

Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                      |  |                                             |  |                             
|-------------------------- |  | -------------------- |  | ------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  þ |  | Non-accelerated filer   ̈                    |  | Smaller Reporting Company   ̈
|                           |  |                      |  | (Do not check if smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).    Yes   ̈    No  þ

As of March 31, 2009, the Registrant had outstanding:

107,927,469 Class A ordinary shares, no par
value; and

30,206,154 Class B ordinary shares, no par value.









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Table of Contents



|                              |  |                                                                                       |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                       |  | Page
|                              | 
|Part I. Financial Information |  | 3                                                                                    
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |  | 3   
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 23  
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 37  
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 38  
|                              | 
|Part II. Other Information    |  | 38                                                                                   
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 38  
|                              |  |                                                                                      
|Item 1A.                      |  | Risk Factors                                                                          |  | 40  
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 40  
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 40  
|                              | 
|Exhibit Index                 |  | 42                                                                                   
|                              |  |                                                                                      
|EX-31.1:                      |  | CERTIFICATION                                                                         |  |     
|                              |  |                                                                                      
|EX-31.2:                      |  | CERTIFICATION                                                                         |  |     
|                              |  |                                                                                      
|EX-32:                        |  | CERTIFICATIONS                                                                        |  |     

OpenTV, the OpenTV logo and our product and service names are trademarks, service marks or registered
trademarks or service marks of OpenTV Corp. or its subsidiaries in the United States and other countries. Other product and service names mentioned herein may be trademarks, service marks or registered trademarks or service marks of their respective
owners.



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Part I. Financial Information



|Item 1. | Financial Statements
|------- | --------------------

OPENTV CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)



|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ------------------ | - | ---------- | -
|                                                                                                                                                                                                                  |  | March 31,2009 |            |   | December 31,2008 * |  
|ASSETS                                                                                                                                                                                                            |  |               |            |   |                    |   |            |  
|Current assets:                                                                                                                                                                                                   |  |               |            |   |                    |   |            |  
|Cash and cash equivalents                                                                                                                                                                                         |  | $             | 106,693    |   |                    | $ | 93,887     |  
|Short-term marketable debt securities                                                                                                                                                                             |  |               | 7,173      |   |                    |   | 7,768      |  
|Accounts receivable, net of allowance for doubtful accounts of $1,168 and $1,076 at March 31, 2009 and December 31, 2008,
respectively                                                                            |  |               | 25,888     |   |                    |   | 27,275     |  
|Prepaid expenses and other current assets                                                                                                                                                                         |  |               | 4,750      |   |                    |   | 4,628      |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|Total current assets                                                                                                                                                                                              |  |               | 144,504    |   |                    |   | 133,558    |  
|Long-term marketable debt securities                                                                                                                                                                              |  |               | 316        |   |                    |   | 1,178      |  
|Property and equipment, net                                                                                                                                                                                       |  |               | 7,507      |   |                    |   | 7,974      |  
|Goodwill                                                                                                                                                                                                          |  |               | 95,250     |   |                    |   | 95,250     |  
|Intangible assets, net                                                                                                                                                                                            |  |               | 8,179      |   |                    |   | 8,519      |  
|Other assets                                                                                                                                                                                                      |  |               | 2,341      |   |                    |   | 2,471      |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|Total assets                                                                                                                                                                                                      |  | $             | 258,097    |   |                    | $ | 248,950    |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|LIABILITIES AND EQUITY                                                                                                                                                                                            |  |               |            |   |                    |   |            |  
|Current liabilities:                                                                                                                                                                                              |  |               |            |   |                    |   |            |  
|Accounts payable                                                                                                                                                                                                  |  | $             | 2,301      |   |                    | $ | 2,287      |  
|Accrued liabilities                                                                                                                                                                                               |  |               | 22,431     |   |                    |   | 17,602     |  
|Accrued restructuring                                                                                                                                                                                             |  |               | 217        |   |                    |   | 238        |  
|Deferred revenue                                                                                                                                                                                                  |  |               | 19,865     |   |                    |   | 16,130     |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|Total current liabilities                                                                                                                                                                                         |  |               | 44,814     |   |                    |   | 36,257     |  
|Accrued liabilities, net of current portion                                                                                                                                                                       |  |               | 999        |   |                    |   | 1,160      |  
|Accrued restructuring, net of current portion                                                                                                                                                                     |  |               | 1,141      |   |                    |   | 1,146      |  
|Deferred revenue, net of current portion                                                                                                                                                                          |  |               | 16,420     |   |                    |   | 17,092     |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|Total liabilities                                                                                                                                                                                                 |  |               | 63,374     |   |                    |   | 55,655     |  
|Commitments and contingencies (Note 13)                                                                                                                                                                           |  |               |            |   |                    |   |            |  
|OpenTV Shareholders equity:                                                                                                                                                                                      |  |               |            |   |                    |   |            |  
|Preference shares, no par value, 500,000,000 shares authorized; none issued and outstanding                                                                                                                       |  |               |           |   |                    |   |           |  
|Class A ordinary shares, no par value, 500,000,000 shares authorized; 107,927,469 and 108,385,176 shares issued and outstanding,
including treasury shares, at March 31, 2009 and December 31, 2008, respectively |  |               | 2,234,162  |   |                    |   | 2,234,687  |  
|Class B ordinary shares, no par value, 200,000,000 shares authorized; 30,206,154 shares issued and outstanding at March 31, 2009 and
December 31, 2008                                                            |  |               | 35,953     |   |                    |   | 35,953     |  
|Additional paid-in capital                                                                                                                                                                                        |  |               | 515,933    |   |                    |   | 515,506    |  
|Treasury shares at cost, zero and 523,647 shares at March 31, 2009 and December 31, 2008, respectively                                                                                                            |  |               |           |   |                    |   | (623       | )
|Accumulated other comprehensive loss                                                                                                                                                                              |  |               | (2,444     | ) |                    |   | (2,163     | )
|Accumulated deficit                                                                                                                                                                                               |  |               | (2,589,309 | ) |                    |   | (2,590,496 | )
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|Total OpenTV shareholders equity                                                                                                                                                                                 |  |               | 194,295    |   |                    |   | 192,864    |  
|Noncontrolling interest                                                                                                                                                                                           |  |               | 428        |   |                    |   | 431        |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|Total equity                                                                                                                                                                                                      |  |               | 194,723    |   |                    |   | 193,295    |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  
|Total liabilities and equity                                                                                                                                                                                      |  | $             | 258,097    |   |                    | $ | 248,950    |  
|                                                                                                                                                                                                                  |  |               |            |   |                    |   |            |  



|* | The condensed consolidated balance sheet at December 31, 2008 has been derived from the companys audited consolidated financial statements at that date.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



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OPENTV CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per
share amounts)



|                                                             |  |                              |             |   |      |   |             |  
|------------------------------------------------------------ |  | ---------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                             |  | Three Months Ended March 31, |            
|                                                             |  | 2009                         |             |   | 2008 |  
|Revenues:                                                    |  |                              |             |   |      |   |             |  
|Royalties and licenses                                       |  | $                            | 21,627      |   |      | $ | 22,221      |  
|Services and other                                           |  |                              | 7,784       |   |      |   | 11,584      |  
|                                                             |  |                              |             |   |      |   |             |  
|Total revenues                                               |  |                              | 29,411      |   |      |   | 33,805      |  
|Cost of revenues:                                            |  |                              |             |   |      |   |             |  
|Royalties and licenses                                       |  |                              | 969         |   |      |   | 1,423       |  
|Services and other                                           |  |                              | 10,047      |   |      |   | 10,073      |  
|                                                             |  |                              |             |   |      |   |             |  
|Total cost of revenues                                       |  |                              | 11,016      |   |      |   | 11,496      |  
|                                                             |  |                              |             |   |      |   |             |  
|Gross profit                                                 |  |                              | 18,395      |   |      |   | 22,309      |  
|Operating expenses:                                          |  |                              |             |   |      |   |             |  
|Research and development                                     |  |                              | 8,635       |   |      |   | 9,292       |  
|Sales and marketing                                          |  |                              | 1,896       |   |      |   | 2,353       |  
|General and administrative                                   |  |                              | 5,723       |   |      |   | 6,371       |  
|Restructuring and impairment                                 |  |                              | (7          | ) |      |   |            |  
|Amortization of intangible assets                            |  |                              | 69          |   |      |   | 185         |  
|                                                             |  |                              |             |   |      |   |             |  
|Total operating expenses                                     |  |                              | 16,316      |   |      |   | 18,201      |  
|                                                             |  |                              |             |   |      |   |             |  
|Profit from operations                                       |  |                              | 2,079       |   |      |   | 4,108       |  
|Interest income                                              |  |                              | 106         |   |      |   | 716         |  
|Other income (expense)                                       |  |                              | (533        | ) |      |   | 1,854       |  
|                                                             |  |                              |             |   |      |   |             |  
|Profit before income taxes                                   |  |                              | 1,652       |   |      |   | 6,678       |  
|Income tax expense                                           |  |                              | 465         |   |      |   | 363         |  
|                                                             |  |                              |             |   |      |   |             |  
|Net income                                                   |  |                              | 1,187       |   |      |   | 6,315       |  
|Less: Net income attributable to the noncontrolling interest |  |                              | (3          | ) |      |   | (8          | )
|                                                             |  |                              |             |   |      |   |             |  
|Net income attributable to OpenTV                            |  | $                            | 1,184       |   |      | $ | 6,307       |  
|                                                             |  |                              |             |   |      |   |             |  
|Net income attributable to OpenTV per share, basic           |  | $                            | 0.01        |   |      | $ | 0.05        |  
|                                                             |  |                              |             |   |      |   |             |  
|Net income attributable to OpenTV per share, diluted         |  | $                            | 0.01        |   |      | $ | 0.04        |  
|                                                             |  |                              |             |   |      |   |             |  
|Shares used in per share calculation, basic                  |  |                              | 138,065,010 |   |      |   | 139,789,266 |  
|                                                             |  |                              |             |   |      |   |             |  
|Shares used in per share calculation, diluted                |  |                              | 138,833,063 |   |      |   | 140,494,112 |  
|                                                             |  |                              |             |   |      |   |             |  

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.



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OPENTV CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                  |  |                              |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Three Months Ended March 31, |        
|                                                                                  |  | 2009                         |         |   | 2008 |  
|Cash flows from operating activities:                                             |  |                              |         |   |      |   |         |  
|Net income                                                                        |  | $                            | 1,187   |   |      | $ | 6,315   |  
|Less: Net income attributable to the noncontrolling interest                      |  |                              | (3      | ) |      |   | (8      | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Net income attributable to OpenTV                                                 |  |                              | 1,184   |   |      |   | 6,307   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |         |   |      |   |         |  
|Depreciation and amortization of property and equipment                           |  |                              | 1,111   |   |      |   | 1,034   |  
|Amortization of intangible assets                                                 |  |                              | 340     |   |      |   | 1,025   |  
|Share-based compensation                                                          |  |                              | 548     |   |      |   | 1,409   |  
|Non-cash employee compensation                                                    |  |                              | 2       |   |      |   | 6       |  
|Provision for doubtful accounts                                                   |  |                              | 360     |   |      |   | 243     |  
|Gain on disposal of fixed assets                                                  |  |                              | (1      | ) |      |   |        |  
|Changes in operating assets and liabilities:                                      |  |                              |         |   |      |   |         |  
|Accounts receivable                                                               |  |                              | 543     |   |      |   | (14,849 | )
|Prepaid expenses and other current assets                                         |  |                              | (122    | ) |      |   | 32      |  
|Other assets                                                                      |  |                              | 130     |   |      |   | (80     | )
|Accounts payable                                                                  |  |                              | 242     |   |      |   | (1,460  | )
|Accrued liabilities                                                               |  |                              | 4,687   |   |      |   | 2,700   |  
|Accrued restructuring                                                             |  |                              | (26     | ) |      |   | (593    | )
|Deferred revenue                                                                  |  |                              | 3,547   |   |      |   | 3,582   |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) operating activities                               |  |                              | 12,545  |   |      |   | (644    | )
|Cash flows from investing activities:                                             |  |                              |         |   |      |   |         |  
|Purchase of property and equipment                                                |  |                              | (735    | ) |      |   | (850    | )
|Proceeds from sale of cost investment                                             |  |                              |        |   |      |   | 1,739   |  
|Proceeds from disposal of property and equipment                                  |  |                              | 2       |   |      |   |        |  
|Proceeds from sale of marketable debt securities                                  |  |                              | 2,284   |   |      |   | 11,359  |  
|Purchase of marketable debt securities                                            |  |                              | (890    | ) |      |   | (1,330  | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash provided by investing activities                                         |  |                              | 661     |   |      |   | 10,918  |  
|Cash flows from financing activities:                                             |  |                              |         |   |      |   |         |  
|Repurchase of restricted shares                                                   |  |                              | (65     | ) |      |   |        |  
|Repurchase of treasury shares                                                     |  |                              | (228    | ) |      |   |        |  
|Capital contribution from the former controlling shareholder                      |  |                              |        |   |      |   | 14,333  |  
|Proceeds from issuance of ordinary shares                                         |  |                              | 21      |   |      |   |        |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                               |  |                              | (272    | ) |      |   | 14,333  |  
|Effect of exchange rate changes on cash and cash equivalents                      |  |                              | (128    | ) |      |   | (260    | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                         |  |                              | 12,806  |   |      |   | 24,347  |  
|Cash and cash equivalents, beginning of period                                    |  |                              | 93,887  |   |      |   | 58,599  |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                          |  | $                            | 106,693 |   |      | $ | 82,946  |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Supplemental disclosure of cash flow information:                                 |  |                              |         |   |      |   |         |  
|Cash paid for income taxes                                                        |  | $                            | (57     | ) |      | $ | (567    | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Non-cash investing and financing activities:                                      |  |                              |         |   |      |   |         |  
|Conversion of exchangeable shares                                                 |  | $                            |        |   |      | $ | 2       |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Retirement of treasury shares                                                     |  | $                            | 623     |   |      | $ |        |  
|                                                                                  |  |                              |         |   |      |   |         |  

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.



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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

In the opinion of
management, these unaudited condensed consolidated interim financial statements (interim financial statements) have been prepared on the same basis as our December 31, 2008 audited consolidated financial statements and include all adjustments,
consisting of only normal closing adjustments, necessary to fairly state the information set forth within. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for interim period financial statements. These interim financial statements
should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Principles of Consolidation

The accompanying interim financial statements include the accounts of OpenTV Corp., sometimes referred to herein as OpenTV, together with its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the 2009 presentation, primarily to account for a noncontrolling interest.

Use of Estimates

The
preparation of the accompanying interim financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. Significant estimates and assumptions include matters
related to revenue recognition, valuation allowances, impairments, restructuring costs and share-based compensation.

Note 2. Summary of Significant
Accounting Policies

Business Combinations

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141(Revised 2007), Business Combinations (SFAS
141(R)). Under SFAS 141(R), an acquiring entity will be required to recognize all of the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141(R) will significantly
change the accounting for business combinations. SFAS 141(R) also includes a substantial number of new disclosure requirements. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after commencement of
the first annual reporting period beginning on or after December 15, 2008.

In April 2009, the FASB issued FASB Staff Position
(FSP) FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (FSP FAS 141R-1). FSP FAS 141R-1 amends the guidance in SFAS 141(R) to address application
issues associated with initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP FAS 141R-1 is effective for assets or liabilities
arising from contingencies in business combinations for which the acquisition date is on or after commencement of the first annual reporting period beginning on or after December 15, 2008.

The adoption of SFAS 141(R) and FSP FAS 141R-1 did not have a material impact on our financial statements. However, the adoption of SFAS 141(R) and FSP
FAS 141R-1 may cause any future business combinations into which we enter to have a significant impact on our financial statements as compared to our prior acquisitions which were accounted for according to the prior rules under GAAP.



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Intangible Assets

In April 2008, the FASB issued FSP FAS 142-3,Determination of the Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3
amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. The intent of FSP FAS 142-3 is to improve the consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other related rules under GAAP. FSP FAS 142-3 is effective for financial statements
issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The adoption of FSP FAS 142-3 did not have a material impact on our financial statements.

Noncontrolling Interest

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes new accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. The adoption of SFAS 160
did not have a material impact on our financial statements. Upon adoption of SFAS 160, we reclassified a noncontrolling interest as a separate component of equity and noncontrolling interest income to net income attributable to noncontrolling
interest in our financial statements. In addition, we disclosed the noncontrolling interest component in comprehensive income footnote as required by SFAS 160.

Recent Accounting Pronouncements

In April 2009, the FASB issued FSP FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). FSP FAS 157-4 provides additional guidance on
factors to consider in estimating fair value when there has been a significant decrease in market activity for a financial asset. FSP FAS 157-4 applies prospectively; retrospective application is not permitted. FSP FAS 157-4 is effective for interim
and annual periods ending after June 15, 2009. We do not expect FSP FAS 157-4 to have a material impact on our financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). FSP FAS 115-2 and FAS 124-2 change the method for determining
whether an other-than-temporary impairment exists for debt securities and the requirements for measurement and presentation of such impairment. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual periods ending after June 15, 2009.
We do not expect FSP FAS 115-2 and FAS 124-2 to have a material impact on our financial statements.

In April 2009, the FASB issued FSP FAS
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 require an entity to provide disclosures about the fair value of its financial instruments
in interim reporting periods and annual reporting periods. FSP FAS 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009. We do not expect FSP FAS 107-1 and APB 28-1 to have a material impact on our financial
statements.

In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1,Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15,
2008 and interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform
with the provisions in FSP EITF 03-6-1. The adoption of FSP EITF 03-6-1 did not have an impact on our financial statements.

In December
2007, the EITF issued Issue No. 07-1,Accounting for Collaborative Arrangements (EITF 07-1). EITF 07-1 requires that transactions with other parties in connection with qualifying collaborative arrangements (i.e., revenue
generated and costs incurred by such parties) be reported in the appropriate line item in each companys financial statements pursuant to the guidance in EITF Issue No. 99-19,Reporting Revenue Gross as a Principal versus Net as
an Agent. EITF 07-1 also includes enhanced disclosure requirements regarding the



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nature and purpose of the arrangement, rights and obligations under the arrangement, applicable accounting policies, amounts involved and income statement
classification of transactions between the parties. EITF 07-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and shall be applied retrospectively to
all prior periods presented for all collaborative arrangements existing as of the effective date. The adoption of EITF 07-1 did not have an impact on our financial statements.

Note 3. Net Income Per Share

Basic net income per share is computed using the weighted average
number of ordinary shares outstanding during the periods presented. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common
shares consists of incremental ordinary shares issuable upon the exercise of stock options (using the treasury stock method) and ordinary shares issuable in exchange for shares of common stock (using the if-converted method) of OpenTV, Inc., our
subsidiary.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except for share
amounts):



|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                                                 |  | Three Months Ended March 31, |            
|                                                                                                                                                                                 |  | 2009                         |             |   | 2008 |  
|Numerator:                                                                                                                                                                       |  |                              |             |   |      |   |             |  
|Net income                                                                                                                                                                       |  | $                            | 1,187       |   |      | $ | 6,315       |  
|Less: Net income attributable to the noncontrolling interest                                                                                                                     |  |                              | (3          | ) |      |   | (8          | )
|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  
|Net income attributable to OpenTV                                                                                                                                                |  | $                            | 1,184       |   |      | $ | 6,307       |  
|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  
|Denominator - basic:                                                                                                                                                             |  |                              |             |   |      |   |             |  
|Basic weighted average shares                                                                                                                                                    |  |                              | 138,065,010 |   |      |   | 139,789,266 |  
|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  
|Denominator - diluted:                                                                                                                                                           |  |                              |             |   |      |   |             |  
|Weighted average shares                                                                                                                                                          |  |                              | 138,065,010 |   |      |   | 139,789,266 |  
|Effect of dilutive securities:                                                                                                                                                   |  |                              |             |   |      |   |             |  
|Class A ordinary shares issuable upon exercise of stock options                                                                                                                  |  |                              | 114,487     |   |      |   | 51,280      |  
|Class A ordinary shares issuable for shares of OpenTV, Inc. Class A common stock (including shares of OpenTV, Inc. Class A
common stock issuable upon exercise of stock options) |  |                              | 653,566     |   |      |   | 653,566     |  
|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  
|Diluted weighted average shares                                                                                                                                                  |  |                              | 138,833,063 |   |      |   | 140,494,112 |  
|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  
|Net income attributable to OpenTV per share, basic                                                                                                                               |  | $                            | 0.01        |   |      | $ | 0.05        |  
|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  
|Net income attributable to OpenTV per share, diluted                                                                                                                             |  | $                            | 0.01        |   |      | $ | 0.04        |  
|                                                                                                                                                                                 |  |                              |             |   |      |   |             |  

The following weighted items as of March 31, 2009 and 2008 were not included in the
computation of diluted net income per share because the effect would be anti-dilutive:



|                                                                |  |                              |  |          
|--------------------------------------------------------------- |  | ---------------------------- |  | ---------
|                                                                |  | Three Months Ended March 31,
|                                                                |  | 2009                         |  | 2008     
|Class A ordinary shares issuable upon exercise of stock options |  | 4,840,916                    |  | 5,607,063



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Note 4. Balance Sheet Components (in thousands)



|                                                |  |               |         |   |                  |   |         |  
|----------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                |  | March 31,2009 |         |   | December 31,2008 |  
|Prepaid expenses and other current assets:      |  |               |         |   |                  |   |         |  
|Value added tax                                 |  | $             | 474     |   |                  | $ | 555     |  
|Current deferred tax asset                      |  |               | 307     |   |                  |   | 312     |  
|Prepaid rent                                    |  |               | 572     |   |                  |   | 572     |  
|Deferred contract costs                         |  |               | 891     |   |                  |   | 719     |  
|Other                                           |  |               | 2,506   |   |                  |   | 2,470   |  
|                                                |  |               |         |   |                  |   |         |  
|                                                |  | $             | 4,750   |   |                  | $ | 4,628   |  
|                                                |  |               |         |   |                  |   |         |  
|Property and equipment:                         |  |               |         |   |                  |   |         |  
|Computers and equipment                         |  | $             | 15,744  |   |                  | $ | 15,383  |  
|Software                                        |  |               | 2,917   |   |                  |   | 2,845   |  
|Furniture and fixtures                          |  |               | 1,563   |   |                  |   | 1,768   |  
|Leasehold improvements                          |  |               | 2,924   |   |                  |   | 2,969   |  
|                                                |  |               |         |   |                  |   |         |  
|                                                |  |               | 23,148  |   |                  |   | 22,965  |  
|Less: Accumulated depreciation and amortization |  |               | (16,155 | ) |                  |   | (15,228 | )
|Add: Construction in progress                   |  |               | 514     |   |                  |   | 237     |  
|                                                |  |               |         |   |                  |   |         |  
|                                                |  | $             | 7,507   |   |                  | $ | 7,974   |  
|                                                |  |               |         |   |                  |   |         |  
|Other assets:                                   |  |               |         |   |                  |   |         |  
|Deposits                                        |  | $             | 1,196   |   |                  | $ | 1,240   |  
|Deferred contract costs                         |  |               | 882     |   |                  |   | 958     |  
|Long-term deferred tax asset                    |  |               | 247     |   |                  |   | 258     |  
|Other                                           |  |               | 16      |   |                  |   | 15      |  
|                                                |  |               |         |   |                  |   |         |  
|                                                |  | $             | 2,341   |   |                  | $ | 2,471   |  
|                                                |  |               |         |   |                  |   |         |  
|Accrued liabilities (current and non-current):  |  |               |         |   |                  |   |         |  
|Accrued payroll and related liabilities         |  | $             | 13,103  |   |                  | $ | 11,251  |  
|Accrued professional fees                       |  |               | 1,740   |   |                  |   | 1,286   |  
|Accrued income taxes                            |  |               | 2,093   |   |                  |   | 1,799   |  
|Deferred rent                                   |  |               | 830     |   |                  |   | 1,043   |  
|Other                                           |  |               | 5,664   |   |                  |   | 3,383   |  
|                                                |  |               |         |   |                  |   |         |  
|                                                |  | $             | 23,430  |   |                  | $ | 18,762  |  
|                                                |  |               |         |   |                  |   |         |  

As of March 31, 2009 and December 31, 2008, accounts receivable included approximately
$1.1 million and $0.3 million, respectively, of unbilled receivables.

Note 5. Goodwill

As of March 31, 2009, our goodwill balance related to (i) our acquisitions of Wink Communications, Inc., ACTV Inc., BettingCorp, substantially
all of the assets of CAM Systems and Ruzz TV, and (ii) our acquisition of minority interests upon the conversions of OpenTV, Inc. shares to OpenTV Corp. shares.

Minority stockholders of OpenTV, Inc., which is a subsidiary of ours that is not publicly traded, have the ability, under certain arrangements, to exchange their shares of OpenTV, Inc. for our Class A ordinary
shares, generally on a one-for-one basis. As the shares are exchanged, they are accounted for at fair value. This accounting effectively provides that at each exchange date, the exchange is accounted for as a purchase by us of a noncontrolling
interest in OpenTV, Inc., valued at the number of our Class A ordinary shares issued to effect the exchange multiplied by the market price of a Class A ordinary share on that date, as such price is reported on The NASDAQ Stock Market.



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Note 6. Intangible Assets

The components of intangible assets, net, excluding goodwill, were as follows (in thousands):



|                            |  |                    |  |                     |        |                         |   |        |                   |  |                    |       |  |   |      
|--------------------------- |  | ------------------ |  | ------------------- | ------ | ----------------------- | - | ------ | ----------------- |  | ------------------ | ----- |  | - | -----
|                            |  |                    |  | March 31, 2009      |        | December 31, 2008      
|                            |  | UsefulLife inYears |  | GrossCarryingAmount |        | AccumulatedAmortization |   |        | NetCarryingAmount |  | Net CarryingAmount
|Intangible assets:          |  |                    |  |                     |        |                         |   |        |                   |  |                    |       |  |   |      
|Patents                     |  | 13                 |  | $                   | 14,102 |                         | $ | (6,236 | )                 |  | $                  | 7,866 |  | $ | 8,136
|Contracts and relationships |  | 5                  |  |                     | 1,000  |                         |   | (717   | )                 |  |                    | 283   |  |   | 333  
|Trademarks                  |  | 4                  |  |                     | 300    |                         |   | (270   | )                 |  |                    | 30    |  |   | 50   
|                            |  |                    |  |                     |        |                         |   |        |                   |  |                    |       |  |   |      
|                            |  |                    |  | $                   | 15,402 |                         | $ | (7,223 | )                 |  | $                  | 8,179 |  | $ | 8,519
|                            |  |                    |  |                     |        |                         |   |        |                   |  |                    |       |  |   |      

The intangible assets are being amortized on a straight-line basis over their estimated useful
lives. Aggregate amortization of intangible assets was $0.3 million and $1.0 million for the three months ended March 31, 2009 and 2008, respectively. Of the aggregate amount, $0.2 million and $0.8 million were reported in
cost of revenues (royalties and licenses) in the statement of operations for the three months ended March 31, 2009 and 2008, respectively.

The future annual amortization expense is expected to be as follows (in thousands):



|                             |  |                     |      
|---------------------------- |  | ------------------- | -----
|Year Ending December 31,     |  | AmortizationExpense
|2009 (remaining nine months) |  | $                   | 991  
|2010                         |  |                     | 1,214
|2011                         |  |                     | 1,081
|2012                         |  |                     | 1,081
|2013                         |  |                     | 1,081
|2014                         |  |                     | 1,081
|Thereafter                   |  |                     | 1,650
|                             |  |                     |      
|                             |  | $                   | 8,179
|                             |  |                     |      

Note 7. Restructuring and Impairment Costs

We continuously monitor our organizational structure and associated operating expenses. Depending upon events and circumstances, actions may be taken to
restructure the business. Restructuring activities could include terminating employees, abandoning excess leased space and incurring other exit costs. Restructuring costs are recorded in accordance with SFAS No. 146,Accounting for
Costs Associated with Exit or Disposal Activities (SFAS 146). SFAS 146 requires that a liability for the cost associated with an exit or disposal activity be recognized when the liability is incurred. Any resulting restructuring costs
depend on numerous estimates made by us based on our knowledge of the activity being affected, the cost to exit existing commitments and fair value estimates. These estimates could differ from actual results. We monitor the initial estimates
periodically and record an adjustment for any significant changes in estimates.

The following sets forth the restructuring activity during
the three months ended March 31, 2009 (in thousands):



|                           |  |                               |    |   |                  |   |       |       |  |   |       |  
|-------------------------- |  | ----------------------------- | -- | - | ---------------- | - | ----- | ----- |  | - | ----- | -
|                           |  | EmployeeSeveranceand Benefits |    |   | ExcessFacilities |   |       | Total | 
|Balance, December 31, 2008 |  | $                             | 14 |   |                  | $ | 1,370 |       |  | $ | 1,384 |  
|Reversal                   |  |                               | (7 | ) |                  |   |      |       |  |   | (7    | )
|Cash payments              |  |                               | (7 | ) |                  |   | (12   | )     |  |   | (19   | )
|                           |  |                               |    |   |                  |   |       |       |  |   |       |  
|Balance, March 31, 2009    |  | $                             |   |   |                  | $ | 1,358 |       |  | $ | 1,358 |  
|                           |  |                               |    |   |                  |   |       |       |  |   |       |  

The outstanding accrual for excess facilities relates to operating lease obligations that expire
in 2016.



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Note 8. Comprehensive Income

The components of comprehensive income, net of tax, were as follows (in thousands):



|                                                                         |  |                              |       |   |      |   |       |  
|------------------------------------------------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                                         |  | Three Months Ended March 31, |      
|                                                                         |  | 2009                         |       |   | 2008 |  
|Reported net income                                                      |  | $                            | 1,187 |   |      | $ | 6,315 |  
|Other comprehensive income (loss):                                       |  |                              |       |   |      |   |       |  
|Foreign currency translation losses                                      |  |                              | (218  | ) |      |   | (198  | )
|Unrealized losses on available-for-sale investments, net of income taxes |  |                              | (63   | ) |      |   | (103  | )
|                                                                         |  |                              |       |   |      |   |       |  
|Comprehensive income                                                     |  | $                            | 906   |   |      | $ | 6,014 |  
|Comprehensive income attributable to the noncontrolling interest         |  |                              | (3    | ) |      |   | (8    | )
|                                                                         |  |                              |       |   |      |   |       |  
|Comprehensive income attributable to OpenTV                              |  | $                            | 903   |   |      | $ | 6,006 |  
|                                                                         |  |                              |       |   |      |   |       |  

Note 9. Share-based Compensation Plans

Employee Stock Purchase Plan

We have an Amended and Restated 1999 Employee Stock Purchase Plan, or ESPP. Our board of directors suspended the ESPP in 2003, and no options or purchase rights are currently outstanding under the ESPP. The ESPP terminates on
December 31, 2009.

Option Plans

Options are currently outstanding under the following plans: (i) the Amended and Restated OpenTV Corp. 1999 Share Option/Share Issuance Plan (1999 Plan); (ii) the Amended and Restated OpenTV, Inc. 1998
Option/Stock Issuance Plan (1998 Plan); (iii) the OpenTV Corp. 2001 Nonstatutory Stock Option Plan (2001 Plan); (iv) the OpenTV Corp. 2003 Incentive Plan (2003 Plan); (v) the OpenTV Corp. 2005 Incentive Plan (2005 Plan);
(vi) option plans relating to outstanding options assumed in connection with the Spyglass merger (collectively, the Assumed Spyglass Plan); and (vii) option plans relating to outstanding options assumed in connection with the ACTV merger
(collectively, the Assumed ACTV Plan).

As a result of our shareholders approval of the 2005 Plan on November 10, 2005, no
further awards will be granted under the 1999 Plan, 2001 Plan or 2003 Plan. The 1999 Plan, 2001 Plan and 2003 Plan remain in existence for the sole purpose of governing outstanding options issued thereunder until such time as such options expire or
have been exercised or cancelled. Options issued under the 1999 Plan, 2001 Plan and 2003 Plan that are forfeited or cancelled are no longer available for future issuance.

2005 Plan. We currently issue options and restricted share awards under the 2005 Plan. The compensation and nominating committee of our board of directors administers the 2005 Plan. The compensation and
nominating committee has the discretion to determine grant recipients, the number and exercise price of stock options, and the number of stock appreciation rights, share awards or share units issued under the 2005 Plan. The options may be incentive
stock options or nonstatutory stock options. Options under the 2005 Plan are granted at an exercise price equal to the fair market value of the underlying shares on the date of grant and typically vest 25% after one year from the date of grant and
1/48th over each of the next 36 months. The term of the options generally is 10 years from the date of grant. Unexercised options generally expire 90 days after termination of employment and are then returned to the pool available for
reissuance. A total of 7,955,896 Class A ordinary shares have been reserved for issuance under the 2005 Plan since its inception. As of March 31, 2009, options to purchase 2,264,470 Class A ordinary shares were outstanding under the
2005 Plan, and 2,351,927 shares were available for future grant.

2003 Plan. Options that were issued under the 2003 Plan were
generally granted at an exercise price equal to the fair market value of the underlying shares on the date of grant and, for grants made through the end of 2004, vested 25% after two years from the date of grant and 25% yearly thereafter for the
following three years. In 2005, we revised the vesting schedule to be consistent with the schedule generally applicable under the 1999 and 2001 Plans. The term of the options generally was 10 years from the date of grant. Unexercised options
generally expire 90 days after termination of employment. A total of 5,000,000 Class A ordinary shares were reserved for issuance under the 2003 Plan. As of March 31, 2009, options to purchase 1,116,790 Class A ordinary shares were
outstanding under the 2003 Plan.

2001 Plan. Options that were issued under the 2001 Plan were generally granted at an exercise
price equal to the fair market value of the underlying shares on the date of grant and vested 25% after one year from the date of grant and 1/48th over each of the next 36 months. The term of the options generally was 10 years from the
date of grant. Unexercised options generally expire 90 days after termination of employment with us. A total of 500,000 Class A ordinary shares were reserved for issuance under the 2001 Plan. As of March 31, 2009, options to purchase
137,534 Class A ordinary shares were outstanding under the 2001 Plan.



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1999 Plan. Options that were issued under the 1999 Plan were generally granted at an exercise
price equal to the fair market value of the underlying shares on the date of grant and vested 25% after one year from the date of grant and 1/48th over each of the next 36 months. The term of the options generally was 10 years from the
date of grant. Unexercised options generally expire three months after termination of employment. A total of 8,980,000 Class A ordinary shares were reserved for issuance under the 1999 Plan. As of March 31, 2009, options to purchase
1,299,960 Class A ordinary shares were outstanding under the 1999 Plan.

1998 Plan. Effective as of October 23, 1999,
options to purchase 5,141,114 shares of Class A common stock of OpenTV, Inc. under the 1998 Plan were assigned to and assumed by us, and these options thereafter represented the right to purchase under the 1999 Plan an identical number of our
Class A ordinary shares. The remainder of the options then outstanding under the 1998 Plan were not assigned to and assumed by us. OpenTV, Inc. no longer issues options from the 1998 Plan. The 1998 Plan remains in existence for the sole purpose
of governing those remaining outstanding options until such time as such options expire or have been exercised or cancelled and the underlying shares have become transferable by the holders. Options or shares awarded under the 1998 Plan that are
forfeited or cancelled will no longer be available for issuance. As of March 31, 2009, options to purchase 62,000 shares of OpenTV, Inc.s Class A common stock were outstanding under the 1998 Plan.

Assumed Plans. Options outstanding under the Assumed Spyglass Plan were converted as a result of the Spyglass acquisition into options to purchase
our Class A ordinary shares. As of March 31, 2009, options to purchase 92,734 Class A ordinary shares were outstanding under the Assumed Spyglass Plan.

Options outstanding under the Assumed ACTV Plan were converted as a result of the ACTV acquisition into options to purchase our Class A ordinary shares. As of March 31, 2009, options to purchase 1,966
Class A ordinary shares were outstanding under the Assumed ACTV Plan.

Options outstanding under the Assumed Spyglass Plan and Assumed
ACTV Plan that are forfeited or cancelled will no longer be available for reissuance. No new options will be granted under either the Assumed Spyglass Plan or the Assumed ACTV Plan.

Restricted Shares Issued to Employees

In December 2007, we issued 1,211,250 restricted Class A ordinary shares under our 2005 Plan to employees in lieu of an annual stock option grant (2007 Restricted Shares). The 2007 Restricted Shares are restricted from sale or
transfer and subject to forfeiture for a period of time that is equivalent to the normal vesting schedule applied to stock options granted under the 2005 Plan. In the event that an employee holding 2007 Restricted Shares is terminated, whether
voluntarily or otherwise, then any 2007 Restricted Shares that have not vested as of the termination date will be forfeited and cancelled, except that our Chief Executive Officer has the right, in certain cases as set forth in his employment
agreement such as his termination without cause or resignation for good reason, to accelerated lapsing of restrictions on a portion of his 2007 Restricted Shares.

As of March 31, 2009, an aggregate of 188,324 of such 2007 Restricted Shares had been forfeited and cancelled as a result of employee terminations. In accordance with the 2005 Plan, such cancelled shares were
returned to the pool available for reissuance.

Restrictions on the sale or transfer
of the 2007 Restricted Shares lapsed as to 25% of such shares in December 2008, and thereafter lapse as to 1/48thof such shares over each of the
remaining 36 months. As of March 31, 2009, restrictions as to an aggregate of 324,509 of the 2007 Restricted Shares had lapsed and we withheld an aggregate of 110,172 of such shares to satisfy applicable withholding tax liabilities. As of
March 31, 2009, 698,416 of the 2007 Restricted Shares were outstanding and subject to restrictions.

In March 2008, we issued 100,000
restricted Class A ordinary shares under our 2005 Plan to our Executive Chairman. Such shares are restricted as to sale or transfer for a period of four years from the date of grant.



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In November 2008, we issued 100,000 restricted Class A ordinary shares under our 2005 Plan to our
Chief Executive Officer pursuant to the terms of his employment agreement. The restrictions as to sale or transfer of such shares lapse with respect to one-third of the restricted shares on each of March 5, 2009, 2010 and 2011. As of
March 31, 2009, restrictions as to 33,333 of such shares had lapsed and we withheld 12,864 of such shares to satisfy applicable withholding tax liabilities.

In March 2009, we issued 100,000 restricted Class A ordinary shares under our 2005 Plan to our Chief Executive Officer pursuant to the terms of his employment agreement. The restrictions as to sale or transfer of
such shares lapse with respect to one-third of the restricted shares on each of January 1, 2010, 2011 and 2012.

2007 Management
Bonus and Equity Issuance Plan (2007 Plan)

In August 2007, our board of directors approved the adoption of the 2007 Plan, which was
a special bonus plan designed both to better align management with certain profitability targets established by our board of directors and as a management retention mechanism following the change in control of our company in January 2007. The
profitability targets were based on cumulative net income of the company, as measured over any four consecutive fiscal quarters during the period commencing April 1, 2007 and ending December 31, 2009, with cumulative net income being based
on net income as publicly reported in the financial statements of the company, subject to certain exclusions. The plan provided for bonus awards, comprised of a combination of a cash amount and a grant of restricted Class A ordinary shares
pursuant to our 2005 Incentive Plan. The 2007 Plan provided for the vesting of the restricted shares and the right to receive the cash component, in each case on a pro rata basis, in accordance with the following schedule: (i) 62.5% upon our
achievement of cumulative net income equal to or greater than zero, (ii) 12.5% upon our achievement of cumulative net income equal to or greater than $4,000,000, and (iii) 25% upon our achievement of cumulative net income equal to or
greater than $6,000,000.

As defined by SFAS No. 123 (revised 2004),Share-based Payment, (SFAS 123(R)), the 2007
Plan allows for both performance and service elements. Accordingly, once vesting is considered probable, we recognize expense on a straight-line basis over the remaining requisite service period. Final compensation cost is recognized only for awards
that ultimately vest. As part of the 2007 Plan, 1,020,232 Class A ordinary shares were issued in August 2007 as 2007 Management Restricted Shares.

All of the profitability targets under the 2007 Plan were achieved in May 2008. At such time, restrictions as to an aggregate of 929,767 of the 2007 Management Restricted Shares lapsed. We withheld an aggregate of
332,258 shares to satisfy applicable withholding tax liabilities.

We recorded approximately $0.8 million of share-based compensation
expense related to achievement of performance targets during the three months ended March 31, 2008.

Share-based Compensation
Expenses

The impact on our results of operations of recording share-based compensation for the three months ended March 31,
2009 and 2008 was as follows (in thousands):



|                                      |  |                              |     |      |   |      
|------------------------------------- |  | ---------------------------- | --- | ---- | - | -----
|                                      |  | Three Months Ended March 31,
|                                      |  | 2009                         |     | 2008
|Cost of revenues - services and other |  | $                            | 82  |      | $ | 238  
|Research and development              |  |                              | 207 |      |   | 504  
|Sales and marketing                   |  |                              | 88  |      |   | 163  
|General and administrative            |  |                              | 171 |      |   | 504  
|                                      |  |                              |     |      |   |      
|                                      |  | $                            | 548 |      | $ | 1,409
|                                      |  |                              |     |      |   |      

Cash received from option exercises under all share-based compensation plans was not significant
for the three months ended March 31, 2009. No options were exercised during the three months ended March 31, 2008. No income tax benefit was recognized in the statement of operations for share-based compensation costs for the three months
ended March 31, 2009 and 2008. No share-based compensation costs were capitalized for the three months ended March 31, 2009 and 2008.



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Valuation Assumptions

We calculated the fair value of each stock option award on the date of grant using the Black-Scholes valuation model. The assumptions used for our
calculations were as follows:



|                                |  |                              |  |              
|------------------------------- |  | ---------------------------- |  | -------------
|                                |  | Three Months Ended March 31,
|                                |  | 2009                         |  | 2008         
|Risk-free interest rates        |  | 1.38% - 1.90%                |  | 3.39% - 3.75%
|Average expected lives (months) |  | 61                           |  | 63           
|Dividend yield                  |  |                             |  |             
|Expected volatility             |  | 71%                          |  | 62%          

Our computations of expected volatility for the three months ended March 31, 2009 and 2008
were based on historical volatility of our share price. Our computations of expected life for the three months ended March 31, 2009 and 2008 were determined based on historical experience of similar awards, giving consideration to the
contractual terms of the share-based awards, vesting schedules and expectations of future employee behavior. The interest rates for periods within the contractual life of the awards are based on the similar United States Treasury yield curve in
effect at the time of grant. While we believe that these assumptions are reasonable, actual experience may differ materially from these assumptions.

We calculated the fair value of restricted shares based on the closing price of our Class A ordinary shares on the date of grant, as such price was quoted on The NASDAQ Stock Market.

Option Award Activity

The
following table summarizes stock option activity under our equity incentive plans during the three months ended March 31, 2009:



|                           |  |                             |   |  |                |  |                               |     
|-------------------------- |  | --------------------------- | - |  | -------------- |  | ----------------------------- | ----
|                           |  | Number ofOptionsOutstanding |   |  | Exercise Price |  | WeightedAverageExercise Price
|Balance, December 31, 2008 |  | 5,185,075                   |   |  |                |  | $                             | 4.84
|Options granted            |  | 77,200                      |   |  | $1.09 - $1.34  |  | $                             | 1.19
|Options exercised          |  | (20,100                     | ) |  | $1.05          |  | $                             | 1.05
|Options forfeited          |  | (119,471                    | ) |  | $1.03 - $3.16  |  | $                             | 2.19
|Options expired            |  | (147,250                    | ) |  | $1.05 - $9.90  |  | $                             | 1.79
|                           |  |                             |   |  |                |  |                               |     
|Balance, March 31, 2009    |  | 4,975,454                   |   |  |                |  | $                             | 4.95
|                           |  |                             |   |  |                |  |                               |     

The following table summarizes information with respect to options outstanding at March 31,
2009:



|                  |  |                     |  |                                           |  |                               |       |                   |           |                               |   |      
|----------------- |  | ------------------- |  | ----------------------------------------- |  | ----------------------------- | ----- | ----------------- | --------- | ----------------------------- | - | -----
|                  |  | Options Outstanding |  | Options Currently Exercisable            
|Exercise Price    |  | NumberOutstanding   |  | Weighted AverageRemainingContractual Life |  | WeightedAverageExercise Price |       | NumberExercisable |           | WeightedAverageExercise Price
|$ 0.33 - $ 1.51   |  | 826,440             |  | 9.13                                      |  | $                             | 1.29  |                   | 76,971    |                               | $ | 1.15 
|$ 1.53 - $ 2.60   |  | 497,436             |  | 6.19                                      |  | $                             | 2.21  |                   | 342,512   |                               | $ | 2.18 
|$ 2.61 - $ 2.69   |  | 30,650              |  | 6.48                                      |  | $                             | 2.66  |                   | 26,340    |                               | $ | 2.66 
|$ 2.70 - $ 2.70   |  | 898,495             |  | 5.58                                      |  | $                             | 2.70  |                   | 898,495   |                               | $ | 2.70 
|$ 2.73 - $ 2.82   |  | 252,358             |  | 6.30                                      |  | $                             | 2.78  |                   | 229,386   |                               | $ | 2.79 
|$ 2.84 - $ 2.84   |  | 1,021,722           |  | 6.60                                      |  | $                             | 2.84  |                   | 819,219   |                               | $ | 2.84 
|$ 2.85 - $ 3.23   |  | 545,625             |  | 5.87                                      |  | $                             | 3.01  |                   | 463,396   |                               | $ | 3.01 
|$ 3.35 - $ 9.72   |  | 567,647             |  | 3.13                                      |  | $                             | 6.59  |                   | 531,094   |                               | $ | 6.80 
|$ 9.90 - $ 82.06  |  | 334,081             |  | 1.16                                      |  | $                             | 32.53 |                   | 334,081   |                               | $ | 32.53
|$ 88.00 - $ 88.00 |  | 1,000               |  | 0.67                                      |  | $                             | 88.00 |                   | 1,000     |                               | $ | 88.00
|                  |  |                     |  |                                           |  |                               |       |                   |           |                               |   |      
|                  |  | 4,975,454           |  | 5.94                                      |  | $                             | 4.95  |                   | 3,722,494 |                               | $ | 5.98 
|                  |  |                     |  |                                           |  |                               |       |                   |           |                               |   |      

Intrinsic Value

The aggregate intrinsic value of an option is calculated as the excess, if any, of the closing price of our Class A ordinary shares over the exercise
price of the option. Aggregate intrinsic value is not equivalent to the value determined by the Black-Scholes valuation model.



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Options Exercised. The aggregate intrinsic value of options exercised under our stock option
plans, determined as of the date of option exercise, was not significant for the three months ended March 31, 2009.

Vested and
Unvested Options. The aggregate intrinsic value of all vested and unvested options outstanding as of March 31, 2009 was approximately $0.2 million, based on the closing price of our Class A ordinary shares on March 31, 2009,
which was $1.51.

Exercisable Options. The aggregate intrinsic value of options currently exercisable as of March 31, 2009 was
not significant, based on the closing price of our Class A ordinary shares on March 31, 2009, which was $1.51. The weighted average remaining contractual life of currently exercisable options, calculated at March 31, 2009, was
5.12 years.

Vested and Expected-to-Vest Options. The number of options vested and expected-to-vest as of March 31, 2009
was 4,678,987, the weighted-average exercise price of which was $5.16. The aggregate intrinsic value of options vested and expected-to-vest as of March 31, 2009 was approximately $0.1 million, based on the closing price of our Class A
ordinary shares on March 31, 2009, which was $1.51. The weighted average remaining contractual life of options vested and expected-to-vest as of March 31, 2009 was 5.78 years.

Weighted Average Grant-date Fair Value. The weighted average grant-date fair value of options granted was $0.71 and $0.66 per share for grants in
the three months ended March 31, 2009 and 2008, respectively.

Restricted Shares Activity

The following table summarizes activity relating to restricted shares during the three months ended March 31, 2009:



|                                                   |  |                 |   |  |                                      |     
|-------------------------------------------------- |  | --------------- | - |  | ------------------------------------ | ----
|                                                   |  | Number ofShares |   |  | Weighted AverageGrant DateFair Value
|Unvested shares balance, December 31, 2008         |  | 980,347         |   |  | $                                    | 1.07
|Unvested restricted shares granted                 |  | 100,000         |   |  | $                                    | 1.34
|Unvested restricted shares forfeited and cancelled |  | (17,957         | ) |  | $                                    | 1.04
|Restricted shares vested                           |  | (97,307         | ) |  | $                                    | 1.08
|                                                   |  |                 |   |  |                                      |     
|Unvested shares balance, March 31, 2009            |  | 965,083         |   |  | $                                    | 1.09
|                                                   |  |                 |   |  |                                      |     

Unrecognized Compensation Expense

As of March 31, 2009, there was approximately $1.0 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested
share-based compensation arrangements granted under our option plans. That cost is expected to be recognized over a weighted-average period of 2.47 years.

As of March 31, 2009, there was approximately $0.5 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted shares granted. That cost is expected to be
recognized over a weighted-average period of 2.66 years.

Note 10. Employee Bonus

As of March 31, 2009, bonus awards under our employee bonus plans in respect of the year ended December 31, 2008 had not yet been approved, but
such awards are expected to be approved and paid during the second quarter of 2009. The estimated amount of the bonus awards was fully accrued as of December 31, 2008.

In August 2007, our board of directors approved the adoption of the 2007 Plan, which was comprised of a combination of a cash amount and a grant of
restricted Class A ordinary shares, subject to achievement of specified profitability targets. We recorded approximately $1.3 million of bonus expense for the cash component of the 2007 Plan related to achievement of performance targets during
the three months ended March 31, 2008. A total of



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1,020,232 restricted Class A ordinary shares were issued pursuant to this plan during 2007. In connection with that issuance, we reserved for issuance
an additional equivalent number of shares under our 2005 Incentive Plan in accordance with the terms of that plan. We recorded approximately $0.8 million of share-based compensation expense for the restricted Class A ordinary shares
component of the 2007 Plan related to achievement of performance targets during the three months ended March 31, 2008. All of the profitability targets under the 2007 Plan were achieved in May 2008.

Note 11. Income Taxes

We are subject to U.S. federal
income tax as well as income tax of multiple foreign and state jurisdictions. We have substantially concluded all U.S. federal income tax matters for years through 1998. We have substantially concluded all material state and local, and foreign
income tax matters for years through 1999.

We have significant net operating loss carryforwards that are subject to certain
Section 382 limitations as a result of past changes in ownership as defined by federal and state law. Certain of these attributes will never be utilized, and we have therefore removed them from our disclosures and our deferred tax assets.

We classify interest and penalties associated with our uncertain tax positions as a component of income tax expense. For the three months
ended March 31, 2009 and 2008, the interest and penalties net of deferred tax benefit that we recognized as part of income tax expense were not material.

California enacted a new tax law during the three months ended March 31, 2009 that gives corporations subject to the California income tax the option, beginning in 2011, to elect single factor apportionment and
assign corporate income to California based solely on sales made within the state as opposed to a combination of sales, payroll and property. We currently anticipate that we will elect single factor apportionment but have determined that the
resulting change in our tax rate will not impact our deferred tax assets since we maintain a full valuation allowance on our U.S. deferred tax assets.

Note 12. Fair Value Measurement

We adopted SFAS No. 157, Fair Value Measures (SFAS 157) as of
January 1, 2008, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. Non-recurring nonfinancial assets and nonfinancial liabilities for which we have not applied the
provisions of SFAS 157 include those measured at fair value in goodwill impairment testing, indefinite-lived intangible assets measured at fair value for impairment testing, and those initially measured at fair value in a business combination.

Valuation Hierarchy

SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial assets or liabilitys
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The
following table provides the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2009 (in thousands):



|                                                         |  |                                 |       |                                                 |   |                                             |  |                                         |       |  |   |  
|-------------------------------------------------------- |  | ------------------------------- | ----- | ----------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | ----- |  | - | -
|                                                         |  |                                 |       | Fair Value Measurements at March 31, 2009 Using
|                                                         |  | CarryingAmount atMarch 31, 2009 |       | Quoted prices inactive markets(Level 1)         |   | Significant otherobservable inputs(Level 2) |  | Significantunobservable inputs(Level 3)
|Available for sale short-term marketable debt securities |  | $                               | 7,173 |                                                 | $ |                                            |  | $                                       | 7,173 |  | $ | 
|Available for sale long-term marketable debt securities  |  |                                 | 316   |                                                 |   |                                            |  |                                         | 316   |  |   | 
|                                                         |  |                                 |       |                                                 |   |                                             |  |                                         |       |  |   |  
|                                                         |  | $                               | 7,489 |                                                 | $ |                                            |  | $                                       | 7,489 |  | $ | 
|                                                         |  |                                 |       |                                                 |   |                                             |  |                                         |       |  |   |  



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Valuation Techniques

Available for sale marketable debt securities are measured at fair value using Level 2 inputs that are observable for the asset or liability, either
directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Note 13. Commitments and
Contingencies

Operating Leases

We lease our facilities from third parties under operating lease agreements or sublease agreements in the United States, Europe and Asia Pacific. As of March 31, 2009, the terms of these leases were set to expire
between June 2009 and May 2012. Total rent expense was approximately $1.3 million for the three months ended March 31, 2009 and 2008, respectively. Sublease income was approximately $0.2 million for the three months ended March 31,
2009. There was no sublease income for the three months ended March 31, 2008.

Future minimum payments, net of future minimum sublease
income, under non-cancelable operating leases as of March 31, 2009 were as follows (in thousands):



|                             |  |                    |      
|---------------------------- |  | ------------------ | -----
|Year ending December 31,     |  | MinimumCommitments
|2009 (remaining nine months) |  | $                  | 3,530
|2010                         |  |                    | 2,510
|2011                         |  |                    | 1,807
|2012                         |  |                    | 203  
|Thereafter                   |  |                    |     
|                             |  |                    |      
|                             |  | $                  | 8,050
|                             |  |                    |      

Other Commitments

In the ordinary course of business we enter into various arrangements with vendors and other business partners for marketing and other services. Future
minimum commitments under these arrangements as of March 31, 2009 were $0.2 million for the remaining nine months of 2009, and insignificant for the years ending December 31, 2010 and 2011. In addition, we also have arrangements with
certain parties that provide for revenue sharing payments.

As of March 31, 2009, we had three standby letters of credit aggregating
approximately $1.2 million, two of which were issued to landlords of our leased properties, and one of which was issued to a sublessee at our New York facility, which we had vacated in the second quarter of 2005. As of March 31, 2009, we
pledged two certificates of deposit aggregating approximately $1.3 million, which were included under short-term marketable debt securities, as collateral in respect of these standby letters of credit.

Contingencies

Claims by
Former Chief Executive Officer. In November 2007, we received a demand from attorneys for Alan A. Guggenheim, our former Chief Executive Officer, claiming that the company was withholding severance and certain other benefits due him under his
employment agreement following termination of his employment in August 2007. We responded that we intended to provide Mr. Guggenheim with all pay and benefits due him under the employment agreement. Thereafter, in December 2007, we were
notified by the Occupational Safety and Health Administration (OSHA) of the United States Department of Labor that we had been named in an administrative complaint filed by Mr. Guggenheim alleging violations of Section 806 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (Sarbanes-Oxley). In the complaint, Mr. Guggenheim claims that the company terminated him for reporting conduct that he alleged to be illegal or unethical and seeks money damages, fees and
costs, reinstatement and any other available relief. On May 1, 2009, we entered into a settlement agreement with Mr. Guggenheim that resolves all issues between us to our mutual satisfaction and without any admission of liability.



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On May 7, 2009, the Department of Labor approved the terms of the settlement agreement pertaining to Sarbanes-Oxley and
officially closed its investigation of the complaint filed by Mr. Guggenheim. The settlement agreement, together with the Department of Labors approval thereof, constitutes full and final resolution of all issues between us and Mr. Guggenheim.

Initial Public Offering Securities Litigation. In July 2001, the first of a series of putative securities class actions was
filed in the United States District Court for the Southern District of New York against certain investment banks which acted as underwriters for our initial public offering, us and various of our officers and directors. In November 2001, a
similar securities class action was filed in the United States District Court for the Southern District of New York against Wink Communications and two of its officers and directors and certain investment banks which acted as underwriters for Wink
Communications initial public offering. We acquired Wink Communications in October 2002. The complaints allege undisclosed and improper practices concerning the allocation of initial public offering shares, in violation of the federal
securities laws, and seek unspecified damages on behalf of persons who purchased our Class A ordinary shares during the period from November 23, 1999 through December 6, 2000 and Wink Communications common stock during the
period from August 19, 1999 through December 6, 2000. Other actions have been filed making similar allegations regarding the initial public offerings of more than 300 other companies. All of these lawsuits have been coordinated for
pretrial purposes asIn re Initial Public Offering Securities Litigation, 21 MC 92 (SAS). Defendants in these cases filed an omnibus motion to dismiss on common pleading issues. All claims against our officers and directors have been
dismissed without prejudice in this litigation pursuant to the parties stipulation approved by the Court on October 9, 2002. On February 19, 2003, the Court denied in part and granted in part the omnibus motion to dismiss filed on
behalf of defendants, including us and Wink Communications. The Courts order dismissed all claims against us and Wink Communications except for a claim brought under Section 11 of the Securities Act of 1933.

In 2007, a settlement that had been pending with the Court since 2004 was terminated by stipulation of the parties, after a ruling by the
Second Circuit Court of Appeals in six focus cases in the IPO litigation (neither OpenTV nor Wink Communications is a focus case) made it unlikely that the settlement would receive final Court approval. Plaintiffs filed
amended master allegations and amended complaints in the six focus cases. In 2008, the Court largely denied the defendants motion to dismiss the amended complaints.

The parties have recently reached a global settlement of the litigation. Under the settlement, which remains subject to Court
approval, the insurers would pay the full amount of settlement share allocated to us and to Wink Communications, and we would bear no financial liability. We, as well as the officer and director defendants (including the
OpenTV officer and director defendants who were previously dismissed from the action pursuant to tolling agreements), would receive complete dismissals from the case. It is uncertain whether the settlement will receive
final Court approval. If the settlement does not receive final Court approval and litigation against us and Wink Communications continues, we believe we have meritorious defenses and intend to defend ourselves vigorously. No provision
has been made in our consolidated financial statements for this matter. We are unable to predict the likelihood of an unfavorable outcome or estimate our potential liability, if any.

Broadcast Innovation Matter. On November 30, 2001, a suit was filed in the United States District Court for the District of Colorado by
Broadcast Innovation, L.L.C., or BI, alleging that DIRECTV, Inc., EchoStar Communications Corporation, Hughes Electronics Corporation, Thomson Multimedia, Inc., Dotcast, Inc. and Pegasus Satellite Television, Inc. are infringing certain claims of
United States patent no. 6,076,094, assigned to or licensed by BI. DIRECTV and certain other defendants settled with BI on July 17, 2003. We are unaware of the specific terms of that settlement. Though we are not currently a defendant in the
suit, BI may allege that certain of our products, possibly in combination with the products provided by some of the defendants, infringe BIs patent. The agreement between OpenTV, Inc. and EchoStar includes indemnification obligations that may
be triggered by the litigation. If liability is found against EchoStar in this matter, and if such a decision implicates our technology or products, EchoStar has notified OpenTV, Inc. of its expectation of indemnification, in which case our business
performance, financial position, results of operations or cash flows may be adversely affected. Likewise, if OpenTV, Inc. were to be named as a defendant and it is determined that the products of OpenTV, Inc. infringe any of the asserted claims,
and/or it is determined that OpenTV, Inc. is obligated to defend EchoStar in this matter, our business performance, financial position, results of operations or cash flows may be adversely affected. On November 7, 2003, BI filed suit against
Charter Communications, Inc. and Comcast Corporation in United States District Court for the District of Colorado, alleging that Charter and Comcast also infringe the 094 patent.



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The agreements between Wink Communications and Charter Communications include indemnification obligations of Wink Communications that may be triggered by the
litigation. While reserving all of our rights in respect of this matter, we have conditionally reimbursed Charter for certain reasonable legal expenses that it incurred in connection with this litigation. On August 4, 2004, the District Court
found the 094 patent invalid. After various procedural matters, including interim appeals, in November 2005, the United States Court of Appeals for the Federal Circuit remanded the case back to the District Court for disposition. On
March 8, 2006, the defendants filed a writ of certiorari in this matter with the Supreme Court of the United States to review the decision of the United States Court of Appeals for the Federal Circuit, which had overturned the District
Courts order for summary judgment in favor of the defendants. That writ of certiorari was denied. Charter filed a request with the United States Patent and Trademark Office on June 8, 2006 to re-examine the patent based on prior art
references. On July 11, 2006, the District Court ordered a stay of the proceedings pending notice as to whether the re-examination request is accepted by the United States Patent and Trademark Office. On June 21, 2006, Charter filed a
motion to stay the litigation pending completion of the Patent Offices reexamination of the 094 patent. On July 11, 2006, the Court granted Charters motion and entered an order staying the case. On August 5, 2006, the
United States Patent and Trademark Office ordered a re-examination of all of the patents claims. The case remains stayed. Based on the information available to us, we have established a reserve for costs and fees that may be incurred in
connection with this matter. That reserve is an estimate only and actual costs may be materially different.

Indemnification

In the ordinary course of our business, we provide indemnification to customers, subject to limitations, against claims of intellectual
property infringement made by third parties arising from the use of our products. Historically, costs related to these indemnification provisions have not been significant. We are not, however, able to estimate the maximum potential impact of these
indemnification provisions on our future results of operations since the liabilities associated with those types of claims are dependent on various factors that are not known until an action is commenced.

As permitted under the laws of the British Virgin Islands, we have agreed to indemnify our officers and directors for certain events or occurrences while
the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer
insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is not material.

Note 14. Related Party Transactions

On January 16, 2007, Kudelski SA completed a stock purchase transaction with Liberty Media Corporation (Liberty Media), pursuant to which Kudelski acquired substantially all of our Class A and Class B ordinary shares owned by
Liberty Media. As of March 31, 2009, Kudelskis total ownership represented approximately 32.3% of the economic interest and approximately 77.2% of the voting interest of our ordinary shares on an undiluted basis. We were not a direct
party to that transaction. However, we received a total of approximately $19.7 million in cash from Liberty Media in connection with that transaction, which represents the total capital contribution due to us pursuant to an agreement we previously
entered into with Liberty Media in February 2006 that provided for us to receive a portion of any premium received by Liberty Media in any sale of its stake in OpenTV. We also received approximately $0.1 million during the three months ended
March 31, 2008, in interest income related to the capital contribution. No further amounts are due to us under the terms of the agreement between us and Liberty Media.

We offer products and services that are complementary to some of the products and services offered by Kudelski, our controlling shareholder, and some of
its affiliates, including Nagravision SA and its subsidiaries. As a result, we have many of the same customers as Kudelski and its other affiliates. Historically, even prior to Kudelski becoming our controlling shareholder, we sold products and
professional services to Nagravision in support of its efforts to sell conditional access products to network operator customers who had deployed or wished to deploy OpenTVs middleware products.

In February 2008, we signed a multi-year license and distribution agreement with Nagravision S.A., a subsidiary of Kudelski, which enables Nagravision to
market and sublicense our middleware products, services and maintenance and support programs to cable, satellite and telecommunications network operators around the world.



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The agreement specifies the applicable license, support and professional services fees that are payable by Nagravision to us in connection with the license
and distribution of our middleware products under the agreement. The terms and conditions set forth in the agreement, including the fees payable by Nagravision, are generally consistent with the terms and conditions we offer to other distributors,
including other conditional access providers. The total amount of license, support and services fees payable to us under this agreement is dependent upon the number of network operator customers sublicensed by Nagravision, the number of set-top
boxes containing our middleware deployed by such customers and the amount of professional services requested by Nagravision. As of March 31, 2009, Nagravision has sublicensed our products under the terms of this agreement to Reliance
Communications in India, Portugal Telecom and TV Cabo in Portugal and Canal Digitaal in the Netherlands. In March 2008, we also signed a master services agreement with Nagravision, which includes the specific terms and conditions that apply to
professional services we may provide to Nagravision from time to time. Unless otherwise agreed, professional services we perform will be billed on a time and materials basis at a daily rate that is competitive with the rates we charge our other
customers.

During the three months ended March 31, 2009, we recognized under these arrangements $1.0 million of royalties and
licenses revenues from Nagravision and $0.8 million of royalties and licenses revenues from Nagra Trading S.A., another subsidiary of Kudelski. During the three months ended March 31, 2008, we recognized $1.2 million of royalties and licenses
and services and other revenues under these arrangements with Nagravision.

As of March 31, 2009, our accounts receivable included
$1.0 million from Nagravision S.A. and $0.8 million from Nagra Trading S.A.

As of December 31, 2008, our accounts receivable included
$3.2 million from Nagravision S.A., $0.7 million from Nagra Trading S.A, and $0.1 million from Nagra France SAS.

On February 27,
2009, we received a non-binding proposal from Kudelski to acquire all of our Class A ordinary shares that are not currently owned by Kudelski or its subsidiaries. On March 4, 2009, our board of directors appointed a special committee
consisting of three independent directors to review the proposal. In connection with its review, the special committee has appointed UBS Securities LLC as its independent financial advisor and Covington & Burling LLP as its independent
legal counsel.

Note 15. Segment Information

In March 2008, Nigel (Ben) Bennett was appointed as Chief Executive Officer after having served as Chief Operating Officer and Acting Chief Executive Officer since August 2007. Accordingly, Mr. Bennett is our chief operating decision
maker, or CODM. Our CODM currently assesses our results and financial performance and reviews our internal budgeting reports on the basis of two segments: middleware solutions and advertising solutions. We have prepared this segment analysis in
accordance with SFAS 131,Disclosure about Segments of an Enterprise and Related Information.

Middleware solutions is
composed of set-top box middleware and embedded browser technologies, such as OpenTV Spyglass, as well as software components that are deployed at the network operators headend.

Advertising solutions includes our OpenTV EclipsePlus, Eclipse, Advision and Participate products.

Our management reviews and assesses the contribution margin of each of these segments, which is not a financial measure calculated in
accordance with GAAP. We define contribution margin for these purposes as segment revenues less related direct or indirect allocable costs, including personnel and personnel-related support costs, communications, facilities, maintenance and support,
consulting and subcontractor costs, travel, marketing and network infrastructure and bandwidth costs. There are significant judgments management makes with respect to the direct and indirect allocation of costs that may affect the calculation of
contribution margins. While management believes these and other related judgments are reasonable and appropriate, others could assess such matters differently.



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Contribution margin is a non-GAAP financial measure that excludes unallocated corporate support,
interest, taxes, depreciation and amortization, amortization of intangible assets, share-based compensation, impairment of goodwill, impairment of intangibles, other income, minority interest, restructuring provisions, and unusual items such as
contract amendments that mitigate potential loss positions. These exclusions reflect costs not considered directly allocable to individual business segments and result in a definition of contribution margin that does not take into account some of
the substantial costs of doing business. Management believes that segment contribution margin is a helpful measure in evaluating the performance of our business segments. While our management may consider contribution margin to be an important
measure of comparative operating performance, this measure should be considered in addition to, but not as a substitute for, profit from operations, net income, cash flow and other measures of financial performance prepared in accordance with GAAP
that are presented in our financial statements. In addition, our calculation of contribution margin may be different from, and not comparable to, the calculation used by other companies.

Because these segments reflect the manner in which management reviews our business, they necessarily involve judgments that management believes are
reasonable in light of the circumstances under which they are made. These judgments may change over time or may be modified to reflect new facts or circumstances. Segments may also be changed or modified to reflect technologies and applications that
are newly created, or that change over time, or other business conditions that evolve, each of which may result in reassessing specific segments and the elements included within each of those segments. Recent events may affect the manner in which we
present segments in the future.

Summarized information by segment was as follows (in thousands):



|                                                             |  |                              |        |   |      |   |        |  
|------------------------------------------------------------ |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                             |  | Three Months Ended March 31, |       
|                                                             |  | 2009                         |        |   | 2008 |  
|Revenues:                                                    |  |                              |        |   |      |   |        |  
|Middleware solutions                                         |  |                              |        |   |      |   |        |  
|Royalties and licenses                                       |  | $                            | 21,071 |   |      | $ | 20,533 |  
|Services and other                                           |  |                              | 5,943  |   |      |   | 9,530  |  
|                                                             |  |                              |        |   |      |   |        |  
|Subtotal - Middleware solutions                              |  |                              | 27,014 |   |      |   | 30,063 |  
|Advertising solutions                                        |  |                              |        |   |      |   |        |  
|Royalties and licenses                                       |  |                              | 556    |   |      |   | 1,688  |  
|Services and other                                           |  |                              | 1,841  |   |      |   | 2,054  |  
|                                                             |  |                              |        |   |      |   |        |  
|Subtotal - Advertising solutions                             |  |                              | 2,397  |   |      |   | 3,742  |  
|                                                             |  |                              |        |   |      |   |        |  
|Total revenues                                               |  | $                            | 29,411 |   |      | $ | 33,805 |  
|                                                             |  |                              |        |   |      |   |        |  
|Contribution margin (loss):                                  |  |                              |        |   |      |   |        |  
|Middleware solutions                                         |  | $                            | 10,840 |   |      | $ | 13,668 |  
|Advertising solutions                                        |  |                              | (271   | ) |      |   | 686    |  
|                                                             |  |                              |        |   |      |   |        |  
|Total contribution margin                                    |  |                              | 10,569 |   |      |   | 14,354 |  
|Unallocated corporate support                                |  |                              | (6,496 | ) |      |   | (6,772 | )
|Restructuring and impairment                                 |  |                              | 7      |   |      |   |       |  
|Depreciation and amortization                                |  |                              | (1,111 | ) |      |   | (1,034 | )
|Amortization of intangible assets                            |  |                              | (340   | ) |      |   | (1,025 | )
|Share-based and non-cash compensation                        |  |                              | (550   | ) |      |   | (1,415 | )
|Interest income                                              |  |                              | 106    |   |      |   | 716    |  
|Other income (expense)                                       |  |                              | (533   | ) |      |   | 1,854  |  
|                                                             |  |                              |        |   |      |   |        |  
|Profit before income taxes                                   |  |                              | 1,652  |   |      |   | 6,678  |  
|Income tax expense                                           |  |                              | 465    |   |      |   | 363    |  
|                                                             |  |                              |        |   |      |   |        |  
|Net income                                                   |  |                              | 1,187  |   |      |   | 6,315  |  
|Less: Net income attributable to the noncontrolling interest |  |                              | (3     | ) |      |   | (8     | )
|                                                             |  |                              |        |   |      |   |        |  
|Net income attributable to OpenTV                            |  | $                            | 1,184  |   |      | $ | 6,307  |  
|                                                             |  |                              |        |   |      |   |        |  



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Our revenues by geographic area, based on the location of network operators who are deploying our
products, were as follows (in thousands):



|                               |  |                              |        |   |     |   |      |   |        |  |     |  
|------------------------------ |  | ---------------------------- | ------ | - | --- | - | ---- | - | ------ |  | --- | -
|                               |  | Three Months Ended March 31, |       
|                               |  | 2009                         |        | % |     |   | 2008 |   | %      | 
|Europe, Africa and Middle East |  |                              |        |   |     |   |      |   |        |  |     |  
|United Kingdom                 |  | $                            | 5,524  |   | 19  | % |      | $ | 6,369  |  | 19  | %
|South Africa                   |  |                              | 2,910  |   | 10  | % |      |   | 2,781  |  | 8   | %
|Italy                          |  |                              | 1,665  |   | 6   | % |      |   | 2,024  |  | 6   | %
|Other countries                |  |                              | 5,655  |   | 19  | % |      |   | 5,617  |  | 17  | %
|                               |  |                              |        |   |     |   |      |   |        |  |     |  
|Subtotal                       |  |                              | 15,754 |   | 54  | % |      |   | 16,791 |  | 50  | %
|Americas                       |  |                              |        |   |     |   |      |   |        |  |     |  
|United States                  |  |                              | 5,216  |   | 18  | % |      |   | 6,267  |  | 18  | %
|Brazil                         |  |                              | 1,987  |   | 7   | % |      |   | 2,119  |  | 6   | %
|Other countries                |  |                              | 258    |   | 0   | % |      |   | 269    |  | 1   | %
|                               |  |                              |        |   |     |   |      |   |        |  |     |  
|Subtotal                       |  |                              | 7,461  |   | 25  | % |      |   | 8,655  |  | 25  | %
|Asia Pacific                   |  |                              |        |   |     |   |      |   |        |  |     |  
|Australia                      |  |                              | 1,781  |   | 6   | % |      |   | 4,335  |  | 13  | %
|Japan                          |  |                              | 2,065  |   | 7   | % |      |   | 1,937  |  | 6   | %
|Other countries                |  |                              | 2,350  |   | 8   | % |      |   | 2,087  |  | 6   | %
|                               |  |                              |        |   |     |   |      |   |        |  |     |  
|Subtotal                       |  |                              | 6,196  |   | 21  | % |      |   | 8,359  |  | 25  | %
|                               |  |                              |        |   |     |   |      |   |        |  |     |  
|                               |  | $                            | 29,411 |   | 100 | % |      | $ | 33,805 |  | 100 | %
|                               |  |                              |        |   |     |   |      |   |        |  |     |  

Three major customers accounted for the following percentages of revenues:



|                   |  |                              |   |  |      |  
|------------------ |  | ---------------------------- | - |  | ---- | -
|                   |  | Three Months Ended March 31, |  
|                   |  | 2009                         |   |  | 2008 |  
|Multichoice Africa |  | 10                           | % |  | 8    | %
|Thomson            |  | 10                           | % |  | 11   | %
|                   |  |                              |   |  |      |  
|                   |  | 20                           | % |  | 19   | %
|                   |  |                              |   |  |      |  

Another major customer is British Sky Broadcasting, or BSkyB, which directly and indirectly
accounted for 18% of total revenues for the three months ended March 31, 2009 and 2008, taking into account the royalties which are paid by four manufacturers who sell set-top boxes to BSkyB, including Thomson.

Two customers accounted for 11% and 10% of net accounts receivable as of March 31, 2009. Three customers respectively accounted for 18%, 14% and 11%
of net accounts receivable as of December 31, 2008.

Capital expenditures by geographic area were as follows (in thousands):



|                |  |                              |     |      |   |    
|--------------- |  | ---------------------------- | --- | ---- | - | ---
|                |  | Three Months Ended March 31,
|                |  | 2009                         |     | 2008
|United States   |  | $                            | 341 |      | $ | 754
|Other countries |  |                              | 394 |      |   | 96 
|                |  |                              |     |      |   |    
|                |  | $                            | 735 |      | $ | 850
|                |  |                              |     |      |   |    



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Long-lived assets by geographic area were as follows (in thousands):



|                        |  |               |       |                  |   |      
|----------------------- |  | ------------- | ----- | ---------------- | - | -----
|                        |  | March 31,2009 |       | December 31,2008
|Property and equipment: |  |               |       |                  |   |      
|United States           |  | $             | 4,346 |                  | $ | 4,494
|Other countries         |  |               | 3,161 |                  |   | 3,480
|                        |  |               |       |                  |   |      
|                        |  | $             | 7,507 |                  | $ | 7,974
|                        |  |               |       |                  |   |      
|Other assets:           |  |               |       |                  |   |      
|United States           |  | $             | 958   |                  | $ | 1,034
|Other countries         |  |               | 1,383 |                  |   | 1,437
|                        |  |               |       |                  |   |      
|                        |  | $             | 2,341 |                  | $ | 2,471
|                        |  |               |       |                  |   |      

Note 16. Subsequent Events

On May 1, 2009, we entered into a settlement agreement with Alan A. Guggenheim, our former Chief Executive Officer, that resolves all issues between us to our mutual satisfaction and without any admission of
liability. On May 7, 2009, the Department of Labor approved the terms of the settlement agreement pertaining to the complaint filed by Mr. Guggenheim alleging violations of Section 806 of Sarbanes-Oxley and officially closed its
investigation of such complaint. The settlement agreement, together with the Department of Labors approval thereof, constitutes full and final resolution of all issues between us and Mr. Guggenheim.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they
never materialize or prove incorrect, could cause the results of OpenTV Corp. and its consolidated subsidiaries to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of
historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, expenses, earnings or losses from operations; any statements of the plans, strategies and objectives of management for future
operations; any statements concerning developments, performance or market conditions relating to products or services; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of
assumptions underlying any of the foregoing. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. These forward-looking statements are based on
information available to us at this time, and we assume no obligation to update any of these statements. Actual results could differ materially from those projected in these forward-looking statements as a result of many factors, including those
identified in the section titled Risk Factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as such section may be updated in our subsequent Quarterly Reports on
Form 10-Q and elsewhere. We urge you to review and consider the various disclosures made by us from time to time in our filings with the Securities and Exchange Commission that attempt to advise you of the risks and factors that may affect our
future results.

The following discussion should be read together with the unaudited condensed consolidated financial statements and
the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements, the notes thereto and the section titled Managements Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the Securities and Exchange Commission.

Overview of Our Business

We are one of the worlds leading providers of advanced digital
television solutions dedicated to creating and delivering compelling viewing experiences to consumers of digital content worldwide. Our software enables cable, satellite, telecommunications and digital terrestrial operators, which we refer to as
network operators, to offer enhanced television experiences to their viewers.

The majority of our revenue typically comes from one-time
royalty fees paid by network operators or manufacturers of set-top boxes once a set-top box, which incorporates our software, has been shipped to or activated by the network operator. We also derive revenue from the licensing of related software and
interactive content and applications associated with the delivery of digital and interactive television, as well as from licensing products that enable advanced advertising solutions. In addition, we receive professional services fees from
consulting, systems integration and training engagements, fees for the maintenance and support of our products and fees from revenue sharing arrangements related to the use of our interactive content and applications.



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Our revenue model may change over time. For example, we have signed subscription-based licensing
agreements under which we receive monthly payments for each set-top box that includes our software that our customers deploy, for so long as those set-top boxes remain active. In addition, our technology and services are provided indirectly through
distribution arrangements with key partners other than network operators and set-top box manufacturers, such as conditional access vendors, and we expect revenues generated from such distribution arrangements to increase over time.

Kudelski SA, directly and indirectly through its subsidiaries, beneficially owns Class A and Class B ordinary shares of our company collectively
representing approximately 32.3% of the economic interest and approximately 77.2% of the voting interest in our company, based on the number of our ordinary shares outstanding as of March 31, 2009. On February 27, 2009, we received a
non-binding proposal from Kudelski to acquire all of our Class A ordinary shares that are not currently owned by Kudelski or its subsidiaries. On March 4, 2009, our board of directors appointed a special committee consisting of three
independent directors to review the proposal. In connection with its review, the special committee has appointed UBS Securities LLC as its independent financial advisor and Covington & Burling LLP as its independent legal counsel.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our interim financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States,
which we refer to as GAAP, as applicable to financial statements for interim reporting periods. The preparation of these interim financial statements requires us to make estimates and judgments that affect the reported amounts of assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. In preparing these interim financial statements, we made our best estimates and judgments, which are normally based
on knowledge and experience with regard to past and current events and assumptions about future events, giving due consideration to materiality. Actual results could differ materially from these estimates under different assumptions or conditions.

We believe the following critical accounting policies and estimates have the greatest potential impact on our interim financial
statements: revenue recognition, valuation allowances (specifically the allowance for doubtful accounts and deferred tax assets), impairment of goodwill and long-lived assets, restructuring costs, share-based compensation and fair value
measurements. All of these accounting policies and estimates, together with their underlying assumptions, and their impact on our financial statements, have been discussed with the audit committee of our board of directors.

As discussed below and in Note 2 to the interim financial statements, we adopted Statement of Financial Accounting Standards (SFAS) No. 141(Revised
2007), Business Combinations (SFAS 141(R)), and FASB Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies(FSP
FAS 141R-1), as of January 1, 2009. The adoption of SFAS 141(R) and FSP FAS 141R-1 did not have a material impact on our financial statements.

We adopted FSP FAS 142-3, Determination of the Useful Life of Intangible Assets as of January 1, 2009 without a material impact on our financial statements.

We adopted SFAS No. 160,Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51 as of
January 1, 2009 without a material impact on our financial statements.

Other than the above changes, there have been no significant
changes in our critical accounting policies and estimates during the three months ended March 31, 2009 as compared to the critical accounting policies and estimates disclosed in the section entitled Managements Discussion and
Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2008.



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Recent Accounting Pronouncements

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP FAS 157-4). FSP FAS 157-4 provides additional guidance on factors to consider in estimating fair value when there has been a significant decrease in market
activity for a financial asset. FSP FAS 157-4 applies prospectively; retrospective application is not permitted. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009. We do not expect FSP FAS 157-4 to have a
material impact on our financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). FSP FAS 115-2 and FAS 124-2 changes the method for determining whether an other-than-temporary impairment exists for debt securities and the requirements for
measurement and presentation of such impairment. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual periods ending after June 15, 2009. We do not expect FSP FAS 115-2 and FAS 124-2 to have a material impact on our financial
statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 requires an entity to provide disclosures about the fair value of its financial instruments in interim reporting periods and annual reporting periods. FSP FAS 107-1 and
APB 28-1 is effective for interim and annual periods ending after June 15, 2009. We do not expect FSP FAS 107-1 and APB 28-1 to have a material impact on our financial statements.

In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1,Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and
interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the
provisions in FSP EITF 03-6-1. The adoption of FSP EITF 03-6-1 did not have an impact on our financial statements.

In December 2007, the
EITF issued Issue No. 07-1,Accounting for Collaborative Arrangements (EITF 07-1). EITF 07-1 requires that transactions with other parties in connection with qualifying collaborative arrangements (i.e., revenue generated and
costs incurred by such parties) be reported in the appropriate line item in each companys financial statements pursuant to the guidance in EITF Issue No. 99-19,Reporting Revenue Gross as a Principal versus Net as an
Agent. EITF 07-1 also includes enhanced disclosure requirements regarding the nature and purpose of the arrangement, rights and obligations under the arrangement, applicable accounting policies, amounts involved and income statement
classification of transactions between the parties. EITF 07-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and shall be applied retrospectively to
all prior periods presented for all collaborative arrangements existing as of the effective date. The adoption of EITF 07-1 did not have an impact on our financial statements.

Results of Operations for the Three Months Ended March 31, 2009 and 2008

Revenues

We have entered into commercial arrangements involving both product licenses and service elements that are bundled together. Under GAAP, revenues from
such bundled offerings have been allocated to theRoyalties and licenses andServices and other revenue line items based on the relative fair values of the product and service elements in each of the contracts.
Our determination of the relative fair values of these elements is based on the relative amounts of the fees we charge our customers for the product licenses and service elements, as set forth in each of the applicable contracts.

Revenues for the three months ended March 31, 2009 were $29.4 million, a decrease of $4.4 million, or 13%, from $33.8 million for the same
period in 2008.



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Revenues by line item were as follows (in millions, except percentages):



|                       |  |                              |      |        |   |                  |  |   |      |   |  |     |   
|---------------------- |  | ---------------------------- | ---- | ------ | - | ---------------- |  | - | ---- | - |  | --- | --
|                       |  | Three Months Ended March 31, |      | Change |  
|                       |  | 2009                         |      | 2008   |   | 2009 versus 2008 | 
|Royalties and licenses |  | $                            | 21.6 |        | $ | 22.2             |  | $ | (0.6 | ) |  | (3  | )%
|Services and other     |  |                              | 7.8  |        |   | 11.6             |  |   | (3.8 | ) |  | (33 | )%
|                       |  |                              |      |        |   |                  |  |   |      |   |  |     |   
|Total revenues         |  | $                            | 29.4 |        | $ | 33.8             |  | $ | (4.4 | ) |  | (13 | )%
|                       |  |                              |      |        |   |                  |  |   |      |   |  |     |   

Royalties and licenses

We generally derive royalties from the sale of set-top boxes and other products that incorporate our software. Royalties are typically paid by either the network operator or the set-top box manufacturer depending upon
our payment arrangements with those customers, and we have historically recognized revenues through one-time royalty payments or ongoing license fees. We recognize royalties upon receipt of royalty reports reflecting unit shipments or activation of
our software by network operators or manufacturers. Royalty reports are generally received one quarter in arrears. For non-refundable prepaid royalties, we recognize revenues upon initial delivery of the software to our customers. We also license
our technology and services indirectly through distribution arrangements with key partners other than network operators and set-top box manufacturers, such as conditional access vendors, who pay the applicable license and royalty fees directly to us
on behalf of the network operator or set-top box manufacturer. We have also entered into license agreements with network operators who pay us under a subscription-based model pursuant to which we are paid a monthly fee for each set-top box that is
shipped or deployed commercially by the network operator for so long as that box remains in use by the network operator. We expect to continue offering this licensing model in the future and expect to derive a greater percentage of our revenues from
subscriber-based fees.

The aggregate amount of royalties we receive from our customers during a quarterly period is influenced by a number
of factors. In the case of our set-top box software, these include: initial deployments by new customers, the activation of new subscribers by existing customers, the shipment of additional set-top boxes as replacements for older or defective
set-top boxes or for purposes of simply upgrading existing set-top boxes, and sales of new products or services by the network operators that require new or updated set-top boxes. We have historically provided various types of prospective volume
discounts on optional future deployments of our licensed middleware products based on the volume of the customers previous deployments of the particular licensed products, and we expect to continue to do so in the future. Unless we are able to
offset anticipated discounts through a change in product mix, upgrades to our software or other methods which enable us to charge higher fees, we may experience slower royalty growth as discounting is triggered.

A significant portion of our revenues is dependent upon our customers subscriber base, the growth in their subscriber base, and the related
quantities of set-top boxes deployed with our software. Specific royalty trends associated with set-top box deployments by our customers are difficult to discern in many cases as we do not control or directly influence actual deployment schedules of
our customers. However, our general experience in the past suggests that set-top box deployments by our customers tend to be stronger in the third and fourth quarters of the calendar year, though many factors, such as the general economic climate
and the specific financial condition of our customers, can influence the actual level of set-top box deployments at any given time. Because we receive most of our royalty reports one quarter in arrears, our royalty revenues in the past have
generally been higher in the first and fourth quarters of the calendar year, though our revenues in 2009 and beyond may be negatively impacted if our customers reduce deployments of our products due to the recent deterioration in worldwide economic
conditions.

We also derive fees from the licensing of other products, such as OpenTV Streamer, our campaign management solution known as
EclipsePlus, and OpenTV Participate. These license fees can be in the form of one-time, upfront payments by our customers, the total of which can vary significantly from quarter to quarter, or can be in the form of a recurring license fee,
the total of which is less likely to vary significantly from quarter to quarter.



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Royalties and licenses revenues by region were as follows (in millions, except percentages):



|                                      |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|------------------------------------- |  | ---------------------------- | ---- | - | ------ | - | ---- | ---------------- |  | - | ---- | - |  | --- | --
|                                      |  | Three Months Ended March 31, |      |   | Change |  
|                                      |  | 2009                         |      |   | 2008   |   |      | 2009 versus 2008 | 
|Europe, Middle East and Africa        |  | $                            | 13.0 |   |        | $ | 11.8 |                  |  | $ | 1.2  |   |  | 10  | % 
|Americas                              |  |                              | 4.8  |   |        |   | 5.4  |                  |  |   | (0.6 | ) |  | (11 | )%
|Asia Pacific                          |  |                              | 3.8  |   |        |   | 5.0  |                  |  |   | (1.2 | ) |  | (24 | )%
|                                      |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|Total royalties and licenses revenues |  | $                            | 21.6 |   |        | $ | 22.2 |                  |  | $ | (0.6 | ) |  | (3  | )%
|                                      |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|As percentage of total revenues       |  |                              | 73   | % |        |   | 66   | %                |  |   |      |   |  |     |   

Royalties and licenses revenues for the three months ended March 31, 2009 decreased $0.6
million, or 3%, to $21.6 million.



| |  |  | Europe, Middle East and Africa accounted for $13.0 million in royalties and licenses revenues for the three months ended March 31, 2009, an increase of $1.2
million, or 10%, compared to the same period in 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

British Sky Broadcasting (BSkyB), directly and indirectly through
our set-top box manufacturer customers who sell set-top boxes to BSkyB, accounted for $4.9 million, or 23%, of our total worldwide royalties and licenses revenues for the three months ended March 31, 2009. BSkyB royalties and licenses
revenues decreased by $0.8 million compared to the same period in 2008, primarily due to a volume-based price reduction that became effective during the three months ended March 31, 2009. This volume-based price reduction may negatively
impact the overall level of revenues that we generate from BSkyB in the future unless we are able to offset the effect of such reduction through increased deployments of our products, an upgrade to a new version of our product that is not subject to
the price reduction or some other means. Royalties and licenses revenues from Portugal Telecom, which we started to receive in late 2008 through our license and distribution agreement with Nagravision, accounted for an increase of $0.8 million in
the three months ended March 31, 2009. Royalties and licenses revenues from Multichoice Africa increased $0.5 million as compared to the same period in 2008, primarily due to increased deployments of our products. The remaining increase of $0.7
million in royalties and licenses revenues resulted from higher volumes of deployments of our products by other customers.



| |  |  | The Americas region accounted for $4.8 million in royalties and licenses revenues for the three months ended March 31, 2009, a decrease of $0.6 million, or
11%, as compared to the same period in 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EchoStar, including DISH Network and EchoStar Technologies LLC, accounted
for $2.5 million, or 12%, of our total worldwide royalties and licenses revenues for the three months ended March 31, 2009. Royalties and licenses revenues from EchoStar increased $0.9 million as compared to the same period in 2008,
primarily due to the receipt of a late royalty report during the three months ended March 31, 2009 for set-top boxes that were shipped during 2008 but not previously reported to us. Royalties and licenses revenues from Time Warner and Comcast
decreased $0.6 million and $0.4 million, respectively, compared to the same period in 2008, primarily due to a new pricing model that became effective as part of an upgrade sold to these customers for our latest EclipsePlus
product. This pricing model includes a one-time, upfront license fee that is typically recognized over the term of contract as compared to our prior pricing model under which we recognized license fees as received. Royalties and licenses
revenues from other customers in the region accounted for a net decrease of $0.5 million compared to the same period in 2008 due to lower volumes of deployments of our products.



| |  |  | The Asia Pacific region accounted for $3.8 million in royalties and licenses revenues for the three months ended March 31, 2009, a decrease of $1.2 million, or
24%, as compared to the same period in 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Royalties and licenses revenues from Austar Entertainment Pty Ltd (Austar)
decreased $1.2 million as compared to the same period in 2008, primarily due to the receipt of a late royalty report during the three months ended March 31, 2008 for set-top boxes that were shipped during 2007 but not previously reported to us.
Royalties and licenses revenues from Panasonic Corporation decreased $0.6 million primarily due to a volume-based price reduction that became effective during the three months ended March 31, 2009. Royalties and licenses revenues from Jupiter
Telecommunications Co., Ltd. (JCOM) decreased $0.3 million primarily due to a decrease in deployments of our products. These decreases were partially offset by an increase of $0.4 million in royalties and licenses revenues from Sky Network
Television Ltd. due to an increase in deployments of our products. Royalties and licenses revenues from other customers accounted for a net increase of $0.5 million due to lower volumes of deployments of our products.



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Services and other

Services and other revenues are primarily generated from professional services, maintenance and support, training, service usage fees, revenue sharing arrangements, and programming fees. Professional services revenues
are generally derived from deployment and integration consulting engagements for network operators, set-top box manufacturers, and systems integrators.

Maintenance and support and training revenues are generally realized as services are provided to network operators and set-top box manufacturers. A set-top box manufacturers decision to purchase maintenance and
support from us depends largely on whether such manufacturer is actively shipping set-top boxes with our software or reasonably expects to do so in quantities large enough to justify payment of these amounts, which, in both cases, is dependent upon
such manufacturers supply contracts with network operators and set-top box demand by the network operator.

Services and other
revenues were as follows (in millions, except percentages):



|                                  |  |                              |     |   |        |   |      |                  |  |   |      |   |  |     |   
|--------------------------------- |  | ---------------------------- | --- | - | ------ | - | ---- | ---------------- |  | - | ---- | - |  | --- | --
|                                  |  | Three Months Ended March 31, |     |   | Change |  
|                                  |  | 2009                         |     |   | 2008   |   |      | 2009 versus 2008 | 
|Total services and other revenues |  | $                            | 7.8 |   |        | $ | 11.6 |                  |  | $ | (3.8 | ) |  | (33 | )%
|As percentage of total revenues   |  |                              | 27  | % |        |   | 34   | %                |  |   |      |   |  |     |   

Services and other revenues for the three months ended March 31, 2009 decreased $3.8 million,
or 33%, to $7.8 million as compared to the same period in 2008. Services and other revenues from Numericable, Austar, Nagravision, Multichoice Africa, and Comcast decreased by $1.4 million, $1.1 million, $0.5 million, $0.4 million, and $0.3
million, respectively, primarily due to the completion of some significant projects during the three months ended March 31, 2008 that allowed us to recognize the associated revenues during that quarter. These decreases were partially offset by
an increase of $1.0 million in services and other revenues from SKY Perfect JSAT Corporation (SKY Perfect) due to our professional services engagement which commenced during the third quarter of 2008. Maintenance and support revenues increased by
$0.6 million in the three months ended March 31, 2009 due to increased deployments of our advertising campaign management product. Services and other revenues from other customers during the three months ended March 31, 2009 accounted for a net
decrease of $1.7 million as compared to the same period in 2008.

Cost of Royalties and Licenses

Cost of royalties and licenses consists primarily of amortization of developed technology and patents, patent-related legal costs, materials and shipping
costs, and cost of revenue share payments. Cost of royalties and licenses was as follows (in millions, except percentages):



|                                |  |                              |     |   |        |   |     |                  |  |   |      |   |  |     |   
|------------------------------- |  | ---------------------------- | --- | - | ------ | - | --- | ---------------- |  | - | ---- | - |  | --- | --
|                                |  | Three Months Ended March 31, |     |   | Change |  
|                                |  | 2009                         |     |   | 2008   |   |     | 2009 versus 2008 | 
|Cost of royalties and licenses  |  | $                            | 1.0 |   |        | $ | 1.4 |                  |  | $ | (0.4 | ) |  | (29 | )%
|As percentage of total revenues |  |                              | 3   | % |        |   | 4   | %                |  |   |      |   |  |     |   

Cost of royalties and licenses for the three months ended March 31, 2009 decreased $0.4
million, or 29%, to $1.2 million. As a percentage of revenues, cost of royalties and licenses decreased to 3% for the three months ended March 31, 2009 as compared to 4% in the same period in 2008. The amortization of developed
technologies and patents decreased by $0.5 million, reflecting the full amortization of our developed technologies from CAM Systems, which we acquired in the third quarter of 2005, and the full amortization of our developed technologies from
BettingCorp, which we acquired in the third quarter of 2003. The decrease was partially offset by an increase of $0.1 million in patent-related legal costs.

Cost of Services and Other

Cost of services and other consists primarily of personnel and personnel-related support
costs associated with maintenance and support, professional services engagements, consulting and subcontractor costs, third party material costs, and depreciation. Cost of services and other was as follows (in millions, except percentages):



|                                |  |                              |      |   |        |   |      |                  |  |   |      |   |  |    |   
|------------------------------- |  | ---------------------------- | ---- | - | ------ | - | ---- | ---------------- |  | - | ---- | - |  | -- | --
|                                |  | Three Months Ended March 31, |      |   | Change |  
|                                |  | 2009                         |      |   | 2008   |   |      | 2009 versus 2008 | 
|Cost of services and other      |  | $                            | 10.0 |   |        | $ | 10.1 |                  |  | $ | (0.1 | ) |  | (1 | )%
|As percentage of total revenues |  |                              | 34   | % |        |   | 30   | %                |  |   |      |   |  |    |   



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Cost of services and other for the three months ended March 31, 2009 decreased $0.1 million, or 1%,
to $10.0 million. As a percentage of revenues, cost of services and other increased to 34% for the three months ended March 31, 2009 as compared to 30% in the same period in 2008. Personnel and personnel-related support costs decreased
$0.4 million partially resulting from our general efforts to shift our workforce to regions with lower costs and the impact of foreign currency translation on our costs denominated in foreign currencies due to the overall strengthening of the United
States dollar during the three months ended March 31, 2009, as compared to the same period in 2008, which were offset by an increase in headcount. In addition, during the three months ended March 31, 2008, we recorded a bonus expense of
$0.2 million and share-based compensation expense of $0.2 million related to the 2007 Management Bonus and Equity Issuance Plan which did not recur during the three months ended March 31, 2009. The decreases were partially offset by an increase
of $0.2 million in the provision for service contracts that are under loss position and an increase of $0.1 million in consulting and subcontractor costs incurred to meet staffing requirements for our current and anticipated projects.

Research and Development

Research and
development expenses consist primarily of personnel and personnel-related support costs and consulting and subcontractor costs incurred for both new product development and enhancements to our existing software products and applications. Research
and development remains important to our long-term growth strategy. We will continue to focus on the timely development of new and enhanced interactive television and advanced advertising products for our customers, and we plan to continue investing
at levels that we believe are sufficient to develop our technologies and product offerings.

Research and development expenses were as
follows (in millions, except percentages):



|                                |  |                              |     |   |        |   |     |                  |  |   |      |   |  |    |   
|------------------------------- |  | ---------------------------- | --- | - | ------ | - | --- | ---------------- |  | - | ---- | - |  | -- | --
|                                |  | Three Months Ended March 31, |     |   | Change |  
|                                |  | 2009                         |     |   | 2008   |   |     | 2009 versus 2008 | 
|Research and development        |  | $                            | 8.6 |   |        | $ | 9.3 |                  |  | $ | (0.7 | ) |  | (8 | )%
|As percentage of total revenues |  |                              | 29  | % |        |   | 28  | %                |  |   |      |   |  |    |   

Research and development expenses for the three months ended March 31, 2009 decreased
$0.7 million, or 8%, to $8.6 million. As a percentage of revenues, research and development expenses increased to 29% for the three months ended March 31, 2009 as compared to 28% in the same period in 2008. Personnel and
personnel-related support costs decreased $0.8 million partially due to our general efforts to shift our workforce to regions with lower costs, which was partially offset by an increase in headcount. In addition, during the three months ended
March 31, 2008, we recorded a bonus expense of $0.5 million and share-based compensation expense of $0.3 million related to the 2007 Management Bonus and Equity Issuance Plan which did not recur during the three months ended March 31,
2009. The decrease was partially offset by a $0.2 million increase in consulting and subcontractor costs.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel and personnel-related support costs, consulting and subcontractor costs, and marketing-related
expenses. Sales and marketing expenses were as follows (in millions, except percentages):



|                                |  |                              |     |   |        |   |     |                  |  |   |      |   |  |     |   
|------------------------------- |  | ---------------------------- | --- | - | ------ | - | --- | ---------------- |  | - | ---- | - |  | --- | --
|                                |  | Three Months Ended March 31, |     |   | Change |  
|                                |  | 2009                         |     |   | 2008   |   |     | 2009 versus 2008 | 
|Sales and marketing             |  | $                            | 1.9 |   |        | $ | 2.4 |                  |  | $ | (0.5 | ) |  | (21 | )%
|As percentage of total revenues |  |                              | 6   | % |        |   | 7   | %                |  |   |      |   |  |     |   



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Sales and marketing expenses for the three months ended March 31, 2009 decreased $0.5 million,
or 21%, to $1.9 million. As a percentage of revenues, sales and marketing expenses decreased to 6% for the three months ended March 31, 2009 as compared to 7% in the same period in 2008. Personnel and personnel-related support costs
decreased $0.4 million partially due to a decrease in headcount. In addition, during the three months ended March 31, 2008, we recorded a bonus expense of $0.1 million and share-based compensation expense of $0.1 million related to the 2007
Management Bonus and Equity Issuance Plan which did not recur during the three months ended March 31, 2009.

General and Administrative

General and administrative expenses consist primarily of personnel and personnel-related support costs, including for our executives and
our board of directors, consulting and subcontractor costs, fees for professional services, including legal and accounting fees, and provision for doubtful accounts. General and administrative expenses were as follows (in millions, except
percentages):



|                                |  |                              |     |   |        |   |     |                  |  |   |      |   |  |     |   
|------------------------------- |  | ---------------------------- | --- | - | ------ | - | --- | ---------------- |  | - | ---- | - |  | --- | --
|                                |  | Three Months Ended March 31, |     |   | Change |  
|                                |  | 2009                         |     |   | 2008   |   |     | 2009 versus 2008 | 
|General and administrative      |  | $                            | 5.7 |   |        | $ | 6.4 |                  |  | $ | (0.7 | ) |  | (11 | )%
|As percentage of total revenues |  |                              | 19  | % |        |   | 19  | %                |  |   |      |   |  |     |   

General and administrative expenses for the three months ended March 31, 2009 decreased $0.7
million, or 11%, to $5.7 million. As a percentage of revenues, general and administrative expenses remained at 19% consistent with the same period in 2008. Personnel and personnel-related support costs decreased $1.1 million primarily because
we recorded a bonus expense of $0.4 million and share-based compensation expense of $0.3 million related to the 2007 Management Bonus and Equity Issuance Plan during the three months ended March 31, 2008 which did not recur during the three
months ended March 31, 2009. The decrease was partially offset by $0.4 million in professional services fees incurred during the three months ended March 31, 2009 for the independent financial advisor and independent legal counsel
appointed by the special committee of our board of directors in connection with its review of the non-binding proposal from Kudelski SA to acquire all of our Class A ordinary shares that are not currently owned by Kudelski or its affiliates.

Amortization of Intangible Assets

Intangible assets are amortized on a straight-line basis over their estimated useful lives of four to 13 years. As noted above, cost of royalties and licenses includes amounts relating to the amortization of developed technologies and
patents. Amortization of intangible assets, excluding these developed technologies and patents, was as follows (in millions, except percentages):



|                                  |  |                              |     |   |        |   |     |                  |  |   |      |   |  |     |   
|--------------------------------- |  | ---------------------------- | --- | - | ------ | - | --- | ---------------- |  | - | ---- | - |  | --- | --
|                                  |  | Three Months Ended March 31, |     |   | Change |  
|                                  |  | 2009                         |     |   | 2008   |   |     | 2009 versus 2008 | 
|Amortization of intangible assets |  | $                            | 0.1 |   |        | $ | 0.2 |                  |  | $ | (0.1 | ) |  | (50 | )%
|As percentage of total revenues   |  |                              | 0   | % |        |   | 1   | %                |  |   |      |   |  |     |   

Amortization of intangible assets for the three months ended March 31, 2009 decreased
$0.1 million, or 50%, to $0.1 million, due to our impairment during the fourth quarter of 2008 of the unamortized value of one of the customer contracts we assumed as part of our acquisition of substantially all of the assets of CAM
Systems in September 2005.

Interest Income

Interest income consists primarily of interest earned on our cash and cash equivalents, and marketable debt securities, net of interest expense. Interest income was as follows (in millions):



|                |  |                              |     |        |   |                  |  |   |      |   |  |     |   
|--------------- |  | ---------------------------- | --- | ------ | - | ---------------- |  | - | ---- | - |  | --- | --
|                |  | Three Months Ended March 31, |     | Change |  
|                |  | 2009                         |     | 2008   |   | 2009 versus 2008 | 
|Interest income |  | $                            | 0.1 |        | $ | 0.7              |  | $ | (0.6 | ) |  | (86 | )%

Interest income for the three months ended March 31, 2009 decreased $0.6 million, or
86%, to $0.1 million, due to the lower effective interest rates on our investment portfolio, which consists of short-term and long-term debt securities issued by United States government entities and other highly rated institutions, and an
overall decrease in the size of our investment portfolio in marketable debt securities.



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Other Income and Expense Items

Other income and expense items consist primarily of gains or losses from foreign currency exchange, gains or losses on the disposal of capital assets,
miscellaneous income, and other unusual items. The net of other income and expense items was as follows (in millions):



|             |  |                              |      |        |      |   |                  |  |   |      |   |  |      |   
|------------ |  | ---------------------------- | ---- | ------ | ---- | - | ---------------- |  | - | ---- | - |  | ---- | --
|             |  | Three Months Ended March 31, |      | Change |     
|             |  | 2009                         |      |        | 2008 |   | 2009 versus 2008 | 
|Other income |  | $                            | (0.5 | )      |      | $ | 1.8              |  | $ | (2.3 | ) |  | (128 | )%

For the three months ended March 31, 2009, net other income (expense) was negatively impacted
by losses on foreign exchange experienced due to the strengthening of the United States dollar relative to the foreign currencies in which a portion of our cash balance was denominated. For the three months ended March 31, 2008, net other
income benefited from the weakening of the United States Dollar relative to the foreign currencies in which a portion of our cash balance was denominated.

Income Taxes

As of March 31, 2009, unrecognized tax benefits approximated $1.3 million, all of which would
affect the effective tax rate if recognized.

We estimate that we had net United States federal tax loss carryforwards of approximately
$185 million at the end of 2008, although our ability to make use of those tax loss carryforwards may be limited under applicable tax regulations. The calculation of those tax loss carryforwards is a complex matter and may require reassessment
from time to time, which could result in changes to that estimate. For all periods presented, substantially all federal tax benefits related to our losses have been offset by an increase in the valuation allowance against the resulting deferred tax
assets. Notwithstanding those federal tax loss carryforwards, we are subject to income taxes in certain state and foreign jurisdictions, and we have foreign taxes withheld from certain royalty payments.

Income tax expense consists primarily of foreign taxes, state taxes, tax benefits or refunds, and changes to reserves for identified potential foreign
tax exposure. Incomes taxes were as follows (in millions):



|                   |  |                              |     |        |   |                  |  |   |     |  |    |  
|------------------ |  | ---------------------------- | --- | ------ | - | ---------------- |  | - | --- |  | -- | -
|                   |  | Three Months Ended March 31, |     | Change |  
|                   |  | 2009                         |     | 2008   |   | 2009 versus 2008 | 
|Income tax expense |  | $                            | 0.5 |        | $ | 0.4              |  | $ | 0.1 |  | 25 | %

The $0.5 million income tax expense recorded in the three months ended March 31, 2009 versus
the income tax expense of $0.4 million recorded in the same period last year primarily resulted from relative differences in the rates of taxation in the various foreign jurisdictions in which we generate revenue and a release of tax reserves
following the expiration of the applicable statute of limitations.

Business Segment Results

In March 2008, Nigel (Ben) Bennett was appointed as Chief Executive Officer after having served as Chief Operating Officer and Acting Chief Executive
Officer since August 2007. Accordingly, Mr. Bennett is our chief operating decision maker, or CODM. Our CODM currently assesses our results and financial performance and reviews our internal budgeting reports on the basis of two segments:
middleware solutions and advertising solutions. We have prepared this segment analysis in accordance with SFAS 131,Disclosure about Segments of an Enterprise and Related Information.

Middleware solutions is composed of set-top box middleware and embedded browser technologies, such as OpenTV Spyglass, as well as software components
that are deployed at the network operators headend.

Advertising solutions includes our OpenTV EclipsePlus, Eclipse, Advision
and Participate products.



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Our management reviews and assesses the contribution margin of each of these segments, which
is not a financial measure calculated in accordance with GAAP. We define contribution margin for these purposes as segment revenues less related direct or indirect allocable costs, including personnel and personnel-related support costs,
communications, facilities, maintenance and support, consulting and subcontractor costs, travel, marketing and network infrastructure and bandwidth costs. There are significant judgments management makes with respect to the direct and indirect
allocation of costs that may affect the calculation of contribution margins. While management believes these and other related judgments are reasonable and appropriate, others could assess such matters differently.

Contribution margin is a non-GAAP financial measure that excludes unallocated corporate support, interest, taxes, depreciation and amortization,
amortization of intangible assets, share-based compensation, impairment of goodwill, impairment of intangibles, other income, minority interest, restructuring provisions, and unusual items such as contract amendments that mitigate potential loss
positions. These exclusions reflect costs not considered directly allocable to individual business segments and result in a definition of contribution margin that does not take into account some of the substantial costs of doing business. Management
believes that segment contribution margin is a helpful measure in evaluating the performance of our business segments. While our management may consider contribution margin to be an important measure of comparative operating performance, this
measure should be considered in addition to, but not as a substitute for, profit from operations, net income, cash flow and other measures of financial performance prepared in accordance with GAAP that are presented in our financial statements. In
addition, our calculation of contribution margin may be different from, and not comparable to, the calculation used by other companies.

Because these segments reflect the manner in which management reviews our business, they necessarily involve judgments that management believes are reasonable in light of the circumstances under which they are made. These judgments may
change over time or may be modified to reflect new facts or circumstances. Segments may also be changed or modified to reflect technologies and applications that are newly created, or that change over time, or other business conditions that evolve,
each of which may result in reassessing specific segments and the elements included within each of those segments. Recent events may affect the manner in which we present segments in the future.

Middleware Solutions

Revenues and
contribution margin of our middleware solutions segment were as follows (in millions, except percentages):



|                                           |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|------------------------------------------ |  | ---------------------------- | ---- | - | ------ | - | ---- | ---------------- |  | - | ---- | - |  | --- | --
|                                           |  | Three Months Ended March 31, |      |   | Change |  
|                                           |  | 2009                         |      |   | 2008   |   |      | 2009 versus 2008 | 
|Royalties and licenses                     |  | $                            | 21.1 |   |        | $ | 20.5 |                  |  | $ | 0.6  |   |  | 3   | % 
|Services and other                         |  |                              | 5.9  |   |        |   | 9.6  |                  |  |   | (3.7 | ) |  | (39 | )%
|                                           |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|Total middleware solutions                 |  | $                            | 27.0 |   |        | $ | 30.1 |                  |  | $ | (3.1 | ) |  | (10 | )%
|                                           |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|As percentage of total revenues            |  |                              | 92   | % |        |   | 89   | %                |  |   |      |   |  |     |   
|Contribution margin - middleware solutions |  | $                            | 10.9 |   |        | $ | 13.7 |                  |  | $ | (2.8 | ) |  | (20 | )%
|                                           |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   

Total revenues from the middleware solutions segment for the three months ended March 31,
2009 decreased $3.1 million, or 10%, to $27.0 million.

Royalties and licenses revenues from the middleware solutions segment account
for the majority of our overall royalties and licenses. Royalties and licenses from set-top box shipments and other product sales accounted for 78% and 68% of segment revenues for the three months ended March 31, 2009 and 2008, respectively.
Royalties and licenses from the middleware solutions segment for the three months ended March 31, 2009 increased $0.6 million, or 3%, to $21.1 million. As described under Royalties and licensesin Revenues
above, BSkyB, directly and indirectly through our set-top box manufacturer customers who sell set-top boxes to BSkyB, accounted for $4.9 million, or 23%, of our total worldwide royalties and licenses revenues for the three months ended
March 31, 2009. BSkyB royalties and licenses revenues decreased by $0.8 million compared to the same period in 2008, primarily due to a volume-based price reduction that became effective during the three months ended March 31, 2009.
Royalties and licenses revenues from Portugal Telecom, which we started to receive in late 2008 through our license and distribution agreement with Nagravision, accounted for an increase of $0.8 million in the three months ended March 31, 2009.
Royalties and licenses revenues from EchoStar, including DISH Network and EchoStar Technologies LLC, increased $0.9 million as compared to the same period in 2008. The increase was primarily due to the receipt of a late royalty report during
the three months ended March 31, 2009 for set-top boxes that were shipped during 2008



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but not previously reported to us. Royalties and licenses revenues from Multichoice Africa increased by $0.5 million as compared to the same period in 2008,
primarily due to increased deployments of set-top boxes. Royalties and licenses revenues from Austar in Australia decreased $1.2 million mainly due to the receipt of a late royalty report during the three months ended March 31, 2008 for set-top
boxes that were shipped during 2007 but not previously reported to us. Royalties and licenses revenue from Panasonic Corporation decreased $0.6 million primarily due to a volume-based price reduction that became effective during the three months
ended March 31, 2009. Royalties and licenses revenues from JCOM in Japan decreased $0.3 million primarily due to a decrease in deployments of our products. These decreases were partially offset by an increase of $0.4 million in royalties and
licenses revenues from Sky Network Television Ltd. due to an increase in deployments of our products. Royalties and licenses revenues from other customers accounted for a net increase of $0.9 million compared to 2008 due to higher volumes of
deployments of our products.

Services and other revenues accounted for 22% and 32% of segment revenues for the three months ended
March 31, 2009 and 2008, respectively. Services and other revenues from the middleware solutions segment for the three months ended March 31, 2009 decreased $3.7 million, or 39%, to $5.9 million. As described underServices and
other inRevenues above, services and other revenues from Numericable, Austar, Nagravision, and Multichoice Africa, decreased by $1.4 million, $1.1 million, $0.5 million, and $0.4 million, respectively, primarily due to
the completion of some significant projects during the three months ended March 31, 2008 that allowed us to recognize the associated revenues during that quarter. These decreases were partially offset by an increase of $1.0 million revenue from
SKY Perfect due to our professional services engagement which commenced during the third quarter of 2008. Revenue from other customers accounted for a net decrease of $1.3 million.

Costs associated with our middleware solutions segment consist primarily of personnel and personnel-related support costs and consulting and
subcontractor costs incurred in connection with professional services engagements. Total contribution margin for the middleware solutions segment for the three months ended March 31, 2009 decreased $2.8 million, or 20%, to $10.9 million as
compared with the same period in 2008, primarily as a result of a $3.1 million decrease in revenues generated in this segment, a $0.4 million increase in consulting and subcontractor costs and a $0.2 million increase in provision for service
contracts that are under loss position, which were partially offset by a $0.9 million decrease in personnel and personnel-related support costs.

Advertising Solutions

Revenues and contribution margin of our advertising solutions segment were as follows (in
millions, except percentages):



|                                            |  |                              |      |   |        |   |     |                  |  |   |      |   |  |     |   
|------------------------------------------- |  | ---------------------------- | ---- | - | ------ | - | --- | ---------------- |  | - | ---- | - |  | --- | --
|                                            |  | Three Months Ended March 31, |      |   | Change |  
|                                            |  | 2009                         |      |   | 2008   |   |     | 2009 versus 2008 | 
|Royalties and licenses                      |  | $                            | 0.5  |   |        | $ | 1.7 |                  |  | $ | (1.2 | ) |  | (71 | )%
|Services and other                          |  |                              | 1.9  |   |        |   | 2.0 |                  |  |   | (0.1 | ) |  | (5  | )%
|                                            |  |                              |      |   |        |   |     |                  |  |   |      |   |  |     |   
|Total advertising solutions revenues        |  | $                            | 2.4  |   |        | $ | 3.7 |                  |  | $ | (1.3 | ) |  | (35 | )%
|                                            |  |                              |      |   |        |   |     |                  |  |   |      |   |  |     |   
|As percentage of total revenues             |  |                              | 8    | % |        |   | 11  | %                |  |   |      |   |  |     |   
|Contribution margin - advertising solutions |  | $                            | (0.3 | ) |        | $ | 0.7 |                  |  | $ | (1.0 | ) |  | 143 | % 
|                                            |  |                              |      |   |        |   |     |                  |  |   |      |   |  |     |   

Total revenues from the advertising solutions segment for the three months ended March 31,
2009 decreased $1.3 million, or 35%, to $2.4 million.

Royalties and licenses revenues from the advertising solutions segment for the three
months ended March 31, 2009 decreased $1.2 million, or 71%, to $0.5 million. As described under Royalties and licenses in Revenues above, royalties and licenses revenues from Time Warner and Comcast
decreased $0.6 million and $0.4 million, respectively, compared to the same period in 2008, primarily due to a new pricing model that became effective as part of an upgrade sold to these customers for our latest EclipsePlus product. This
pricing model includes a one-time, upfront license fee that is typically recognized over the term of contract as compared to our prior pricing model under which we recognized license fees as received. Royalties and licenses revenues from other
customers accounted for a net decrease of $0.2 million compared to the same period in 2008 due to lower volumes of deployments of our products.



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Services and other revenues from the advertising solutions segment for the three months ended
March 31, 2009 decreased by $0.1 million, or 5%, to $1.9 million. As described underServices and other inRevenues above, services and other revenues from Comcast decreased by $0.3 million, primarily due a
decrease in professional services engagements during the three months ended March 31, 2009. Maintenance and support revenues increased by $0.6 million in the three months ended March 31, 2009 due to increased deployments of our advertising
campaign management product. Services and other revenues from other customers accounted for a net decrease of $0.4 million as compared to the same period in 2008 mainly due a decrease in professional services engagements.

Total contribution margin for the advertising solutions segment for the three months ended March 31, 2009 decreased $1.0 million, or 143%, to a loss
of $0.3 million as compared with the same period in 2008, primarily as a result of a $1.3 million decrease in revenues which was partially offset by a $0.4 million decrease in personnel and personnel-related support costs.

Reconciliation of Contribution Margin to Net Income

Total contribution margin reconciled to net income on a GAAP basis was as follows (in millions):



|                                                             |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|------------------------------------------------------------ |  | ---------------------------- | ---- | - | ------ | - | ---- | ---------------- |  | - | ---- | - |  | --- | --
|                                                             |  | Three Months Ended March 31, |      |   | Change |  
|                                                             |  | 2009                         |      |   | 2008   |   |      | 2009 versus 2008 | 
|Total contribution margin                                    |  | $                            | 10.6 |   |        | $ | 14.4 |                  |  | $ | (3.8 | ) |  | (26 | )%
|Unallocated corporate overhead                               |  |                              | (6.5 | ) |        |   | (6.8 | )                |  |   |      |   |  |     |   
|Depreciation and amortization                                |  |                              | (1.1 | ) |        |   | (1.0 | )                |  |   |      |   |  |     |   
|Amortization of intangible assets                            |  |                              | (0.3 | ) |        |   | (1.0 | )                |  |   |      |   |  |     |   
|Share-based and non-cash compensation                        |  |                              | (0.6 | ) |        |   | (1.4 | )                |  |   |      |   |  |     |   
|Interest income                                              |  |                              | 0.1  |   |        |   | 0.7  |                  |  |   |      |   |  |     |   
|Other income (expense)                                       |  |                              | (0.5 | ) |        |   | 1.8  |                  |  |   |      |   |  |     |   
|                                                             |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|Profit before income taxes                                   |  |                              | 1.7  |   |        |   | 6.7  |                  |  |   |      |   |  |     |   
|Income tax expense                                           |  |                              | 0.5  |   |        |   | 0.4  |                  |  |   |      |   |  |     |   
|                                                             |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|Net income                                                   |  |                              | 1.2  |   |        |   | 6.3  |                  |  |   |      |   |  |     |   
|Less: Net income attributable to the noncontrolling interest |  |                              |     |   |        |   |     |                  |  |   |      |   |  |     |   
|                                                             |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   
|Net income attributable to OpenTV                            |  | $                            | 1.2  |   |        | $ | 6.3  |                  |  |   |      |   |  |     |   
|                                                             |  |                              |      |   |        |   |      |                  |  |   |      |   |  |     |   

Deferred Revenue

When we apply our revenue recognition policy, we must determine which portions of our revenue are recognized currently and which portions must be deferred, principally in accordance with Statement of Position (SOP)
97-2,Software Revenue Recognition, SOP 81-1,Accounting for Performance of Construction-Type and Certain Production-Type Contracts, and SEC Staff Accounting Bulletin No. 104,Revenue
Recognition. In order to determine current and deferred revenue, we make judgments and estimates with regard to future product and services deliverables and the appropriate valuation of those deliverables.

Some of our contractual arrangements with our customers involve multiple elements that impact the timing of recognition of revenues received from such
customers, including, for example, our arrangements with Essel Group (which operates the DishTV network in India), FOXTEL in Australia and Comcast and Time Warner in the United States. At the time that a multiple-element arrangement is entered into,
we make a determination as to whether vendor specific objective evidence, or VSOE, of fair value exists for each of the elements involved in the arrangement. To the extent VSOE does not exist for any undelivered elements, then all or portions of the
amounts that we invoice under the applicable arrangement are generally deferred and recognized as revenue over time. For example, some of our arrangements provide for the delivery of future specified products and services, for which VSOE of fair
value does not exist. In addition, some of our contracts include maintenance and support offerings, for which VSOE of fair value does not exist. In instances where VSOE of fair value for maintenance and support does not exist, we will generally
recognize all revenues from the arrangement either over the remaining contractual period of support or over the remaining period during which maintenance and support is expected to be provided, once all other specified deliverables have been
delivered. In instances where VSOE of fair value for maintenance and support exists and there are future specified products and services for which VSOE of fair value does not exist, we will generally recognize all revenues upon the final delivery of
the future specified products and services, except for the fair value of the revenues relating to the remaining undelivered maintenance and support, which will be recognized over the remaining period of support.



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As of March 31, 2009, we had a balance of $36.3 million in deferred revenue compared with
$33.2 million as of December 31, 2008. Based on our current estimates, we expect the following recognition of this deferred revenue balance (in millions):



|                                     |  |                                         |     
|------------------------------------ |  | --------------------------------------- | ----
|                                     |  | Expected Recognitionof Deferred Revenue
|Through March 31, 2010               |  | $                                       | 19.9
|April 1, 2010 through March 31, 2011 |  |                                         | 8.7 
|Thereafter                           |  |                                         | 7.7 
|                                     |  |                                         |     
|                                     |  | $                                       | 36.3
|                                     |  |                                         |     

In order to determine the expected recognition of deferred revenue set forth in the foregoing
table, we make judgments and estimates regarding, among other things, future product and services deliverables, the appropriate valuation of those products and services and expected changes in customer requirements. These judgments and estimates
could differ from actual events, particularly those that involve factors outside of our control. As a result, the actual revenue recognized from these arrangements and the timing of that recognition may differ from the amounts identified in this
table. While management believes that this information is a helpful measure in evaluating the companys performance, investors should understand that unless and until the company is actually able to recognize these amounts as revenue in
accordance with GAAP, there can be no assurance that the conditions to recognizing that revenue will be satisfied.

Liquidity and Capital Resources

We expect to be able to fund our operating and capital requirements for at least the next twelve months by using existing cash balances and
short-term and long-term marketable debt securities if our assumptions about our revenues, expenses and cash commitments are generally accurate. Because we cannot be certain that our assumptions about our business or the digital television and
advanced advertising markets in general will prove to be accurate, our funding requirements may differ from our current expectations.

Our
primary source of cash from operations is royalty payments from customers. The primary uses of cash are personnel and personnel-related costs, subcontractor and consulting costs, facilities costs, and capital expenditures. In February 2008, we
received $14.3 million in cash from Liberty Media after the expiration of the indemnity period specified in the stock purchase agreement between Liberty Media and Kudelski.

The mix of cash and short-term and long-term investments may change in the future as we make decisions regarding the composition of our investment
portfolio. We use professional investment management firms to manage a significant portion of our invested cash. The portfolio consists of highly liquid, high-quality investment grade securities of the United States government and agencies,
corporate notes and bonds and certificates of deposit that predominantly have maturities of less than three years. All investments are made in accordance with our written investment policy, which has been approved by our board of directors.

The mix of cash and short-term and long-term securities was as follows, which may change in the future as we make decisions regarding the
composition of our investment portfolio (in millions, except percentages):



|                                      |  |               |       |                  |   |        |  |   |      |   |  |     |   
|------------------------------------- |  | ------------- | ----- | ---------------- | - | ------ |  | - | ---- | - |  | --- | --
|                                      |  | March 31,2009 |       | December 31,2008 |   | Change | 
|Cash and cash equivalents             |  | $             | 106.7 |                  | $ | 93.9   |  | $ | 12.8 |   |  | 14  | % 
|Short-term marketable debt securities |  |               | 7.2   |                  |   | 7.7    |  |   | (0.5 | ) |  | (6  | )%
|Long-term marketable debt securities  |  |               | 0.3   |                  |   | 1.2    |  |   | (0.9 | ) |  | (75 | )%
|                                      |  |               |       |                  |   |        |  |   |      |   |  |     |   
|Total cash portfolio                  |  | $             | 114.2 |                  | $ | 102.8  |  | $ | 11.4 |   |  | 11  | % 
|                                      |  |               |       |                  |   |        |  |   |      |   |  |     |   

The summary of cash flows from operating activities, investing activities and financing activities
for the three months ended March 31, 2009 and 2008 was as follows (in millions, except percentages):



|                                                |  |                              |      |   |        |   |      |                  |  |   |       |  
|----------------------------------------------- |  | ---------------------------- | ---- | - | ------ | - | ---- | ---------------- |  | - | ----- | -
|                                                |  | Three Months Ended March 31, |      |   | Change |  
|                                                |  | 2009                         |      |   | 2008   |   |      | 2009 versus 2008 | 
|Cash provided by (used in) operating activities |  | $                            | 12.5 |   |        | $ | (0.6 | )                |  | $ | 13.1  |  
|Cash provided by investing activities           |  | $                            | 0.7  |   |        | $ | 10.9 |                  |  | $ | (10.2 | )
|Cash provided by (used in) financing activities |  | $                            | (0.3 | ) |        | $ | 14.3 |                  |  | $ | (14.6 | )



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Cash provided by (used in) operating activities

The increase of $13.1 million in net cash provided by (used in) operating activities during the three months ended March 31, 2009 as compared to the
same period in 2008 was primarily attributable to a $15.4 million increase in the changes in accounts receivable and a net increase of $4.2 million in changes of other current assets and liabilities. The increases were partially offset by a
$6.5 million decrease in net income, net of non-cash items.

Cash provided by investing activities

The decrease of $10.2 million in net cash provided by investing activities during the three months ended March 31, 2009 as compared to the same
period in 2008 primarily represented a $8.6 million decrease in net proceeds from the sales of marketable debt securities. In addition, during the three months ended March 31, 2008, we received $1.7 million from the sale of a cost investment.
The decreases were partially offset by a $0.1 million reduction in capital expenditures.

Cash provided by (used in) financing activities

The decrease of $14.6 million in net cash provided by (used in) financing activities during the three months ended March 31, 2009 as
compared to the same period in 2008 was primarily due to the $14.3 million capital contribution received from Liberty Media in February 2008, $0.2 million cash paid during the three months ended March 31, 2009 to repurchase our Class A ordinary
shares, and $0.1 million cash paid during three months ended March 31, 2009 to repurchase restricted Class A ordinary shares held by employees in order to satisfy applicable withholding taxes upon lapsing of the restrictions on such
shares.

Commitments and Contractual Obligations

Information as of March 31, 2009 concerning the amount and timing of required payments under our contractual obligations is summarized below (in millions):



|                                    |  |       |     |                                |   |                   |  |                   |     |                     |   |     |  |   |  
|----------------------------------- |  | ----- | --- | ------------------------------ | - | ----------------- |  | ----------------- | --- | ------------------- | - | --- |  | - | -
|                                    |  | Total |     | Due inremaining 9months in2009 |   | Due in 2010 -2011 |  | Due in 2012 -2013 |     | Due in 2014 orafter
|Operating leases obligations        |  | $     | 8.0 |                                | $ | 3.5               |  | $                 | 4.3 |                     | $ | 0.2 |  | $ | 
|Noncancellable purchase obligations |  |       | 0.2 |                                |   | 0.2               |  |                   |    |                     |   |    |  |   | 
|                                    |  |       |     |                                |   |                   |  |                   |     |                     |   |     |  |   |  
|Total contractual obligations       |  | $     | 8.2 |                                | $ | 3.7               |  | $                 | 4.3 |                     | $ | 0.2 |  | $ | 
|                                    |  |       |     |                                |   |                   |  |                   |     |                     |   |     |  |   |  

In the ordinary course of business we enter into various arrangements with vendors and other
business partners for marketing and other services. Future minimum commitments under these arrangements as of March 31, 2009 were $0.2 million for the remaining nine months of 2009, and insignificant for the years ending December 31, 2010
and 2011. In addition, we also have arrangements with certain parties that provide for revenue sharing payments.

As of March 31,
2009, we had three standby letters of credit aggregating approximately $1.2 million, two of which were issued to landlords of our leased properties, and one of which was issued to a sublessee at our New York facility which we vacated in the second
quarter of 2005. As of March 31, 2009, we pledged two certificates of deposit aggregating approximately $1.3 million, which were included under short-term marketable debt securities, as collateral in respect of these standby letters of credit.

Indemnification

In the ordinary
course of our business, we provide indemnification to customers, subject to limitations, against claims of intellectual property infringement made by third parties arising from the use of our products. Costs related to these indemnification
provisions are sometimes difficult to estimate. While we have not historically experienced significant costs for these matters, there may be occasions in the ordinary course of our business where we assume litigation and other costs on behalf of our
customers that could have an adverse effect on our financial position depending upon the outcome of any specific matter. We ordinarily seek to limit our liabilities in those arrangements in various respects, including monetarily, but the costs
associated with any type of intellectual property indemnification arrangement continue to escalate in general, and especially in the technology sector.



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As permitted under the laws of the British Virgin Islands, we have agreed to indemnify our officers and
directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification agreements is
unlimited; however, we have director and officer insurance coverage that mitigates our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of
applicable insurance coverage is not material.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We are exposed to financial market risks. This exposure relates to our holdings of fixed income investment securities and assets and liabilities denominated in foreign currencies.

Fixed Income Investment Risk

We own a fixed income
investment portfolio with various holdings, types and maturities. These investments are generally classified as available-for-sale. Available-for-sale securities are recorded on the balance sheet at fair value with unrealized gains or losses, net of
tax, included as a separate component of the balance sheet line item titled accumulated other comprehensive income (loss).

Most of these investments consist of a diversified portfolio of highly liquid United States dollar-denominated debt securities classified by maturity as cash equivalents, short-term investments or long-term investments. These debt
securities are not leveraged and are held for purposes other than trading. Our investment policy limits the maximum maturity of securities in this portfolio to three years and weighted-average maturity to 15 months. Although we expect that
market value fluctuations of our investments in short-term debt obligations will not be significant, a sharp rise in interest rates could have a material adverse effect on the value of securities with longer maturities in the portfolio.
Alternatively, a sharp decline in interest rates could have a material positive effect on the value of securities with longer maturities in the portfolio. We do not currently hedge interest rate exposures.

Our investment policy limits investment concentration in any one issuer (other than with respect to United States treasury and agency securities) and
also restricts this part of our portfolio to investment grade obligations based on the assessments of rating agencies. There have been instances in the past where the assessments of rating agencies have failed to anticipate significant defaults by
issuers. It is possible that we could lose most or all of the value in an individual debt obligation as a result of a default. A loss through a default may have a material impact on our earnings even though our policy limits investments in the
obligations of a single issuer to no more than five percent of the value of our portfolio.

The following table presents the hypothetical
changes in fair values in our portfolio of investment securities with original maturities greater than 90 days as of March 31, 2009 using a model that assumes immediate sustained parallel changes in interest rates across the range of
maturities (in thousands):



|                           |  |                               |       |                                                    |   |                                                    |  |                                                    |       |                                                    |   |       |  |   |      
|-------------------------- |  | ----------------------------- | ----- | -------------------------------------------------- | - | -------------------------------------------------- |  | -------------------------------------------------- | ----- | -------------------------------------------------- | - | ----- |  | - | -----
|                           |  | Fair Value asof March 31,2009 |       | Valuation ofSecurities ifInterest RatesDecrease 1% |   | Valuation ofSecurities ifInterest RatesIncrease 1% |  | Valuation ofSecurities ifInterest RatesDecrease 2% |       | Valuation ofSecurities ifInterest RatesIncrease 2%
|Marketable debt securities |  | $                             | 7,489 |                                                    | $ | 7,500                                              |  | $                                                  | 7,478 |                                                    | $ | 7,511 |  | $ | 7,467

The modeling technique used in the above table estimates fair values based on changes in interest
rates assuming static maturities. The fair value of individual securities in our investment portfolio is likely to be affected by other factors including changes in ratings, market perception of the financial strength of the issuers of such
securities and the relative attractiveness of other investments. Accordingly, the fair value of our individual securities could also vary significantly in the future from the amounts indicated above.



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Foreign Currency Exchange Rate Risk

We transact business in various foreign countries. We incur a substantial majority of our expenses, and earn most of our revenues, in United States dollars. Although a majority of our worldwide customers are invoiced
and make payments in United States dollars, some of our customer contracts provide for payments to be remitted in local currency. As of March 31, 2009, we held approximately $7.2 million of various foreign currencies as a result of our
worldwide operations.

We have a foreign currency exchange exposure management policy. The policy permits the use of foreign currency
forward exchange contracts and foreign currency option contracts and the use of other hedging procedures in connection with hedging foreign currency exposures. The policy requires that the use of derivatives and other procedures qualify for hedge
treatment under SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities and SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. During the three months
ended March 31, 2009, we did not use foreign currency forward exchange contracts, options in hedging foreign currency exposures, or other hedging procedures. However, we regularly assess our foreign currency exchange rate risk that results from
our global operations, and we may in the future elect to make use of appropriate hedging strategies.



|Item 4. | Controls and Procedures
|------- | -----------------------

Management of the company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Based on
their evaluation as of March 31, 2009, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended) were effective.

There were no changes in our internal control over financial reporting during the quarter ended
March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected.

Part II. Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

The
information set forth in this Section has been included only to the extent that it reflects a significant update of information previously set forth in our Annual Report on Form 10-K for the year ended December 31, 2008. To the extent that
we do not have any significant changes in the legal proceedings referred to in such Annual Report, we have not restated the description of those proceedings. That determination not to so restate those descriptions should not be taken as a
representation that we have resolved the matter or that it is no longer a contingency. In addition, any update to the legal proceedings referred to below does not necessarily mean that the information contained in the update is material; rather, we
have determined that the updated information is relevant to a fair assessment of the matter and is intended to provide our investors with a reasonable understanding of the nature of the legal proceeding as we understand it on the date of this
Quarterly Report.

Claims by Former Chief Executive Officer. In November 2007, we received a demand from attorneys for Alan A.
Guggenheim, our former Chief Executive Officer, claiming that the company was withholding severance and certain other benefits due him under his employment agreement following termination of his employment in August 2007. We responded that we
intended to provide Mr. Guggenheim with all pay and benefits due him under



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the employment agreement. Thereafter, in December 2007, we were notified by the Occupational Safety and Health Administration (OSHA) of the United States
Department of Labor that we had been named in an administrative complaint filed by Mr. Guggenheim alleging violations of Section 806 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (Sarbanes-Oxley). In the complaint,
Mr. Guggenheim claims that the company terminated him for reporting conduct that he alleged to be illegal or unethical and seeks money damages, fees and costs, reinstatement and any other available relief. On May 1, 2009, we entered into a
settlement agreement with Mr. Guggenheim that resolves all issues between us to our mutual satisfaction and without any admission of liability. On May 7, 2009, the Department of Labor approved the terms of the settlement agreement pertaining to
Sarbanes-Oxley and officially closed its investigation of the complaint filed by Mr. Guggenheim. The settlement agreement, together with the Department of Labors approval thereof, constitutes full and final resolution of all issues between us
and Mr. Guggenheim.

Initial Public Offering Securities Litigation. In July 2001, the first of a series of putative securities
class actions was filed in the United States District Court for the Southern District of New York against certain investment banks which acted as underwriters for our initial public offering, us and various of our officers and directors. In
November 2001, a similar securities class action was filed in the United States District Court for the Southern District of New York against Wink Communications and two of its officers and directors and certain investment banks which acted as
underwriters for Wink Communications initial public offering. We acquired Wink Communications in October 2002. The complaints allege undisclosed and improper practices concerning the allocation of initial public offering shares, in
violation of the federal securities laws, and seek unspecified damages on behalf of persons who purchased our Class A ordinary shares during the period from November 23, 1999 through December 6, 2000 and Wink Communications
common stock during the period from August 19, 1999 through December 6, 2000. Other actions have been filed making similar allegations regarding the initial public offerings of more than 300 other companies. All of these lawsuits have been
coordinated for pretrial purposes asIn re Initial Public Offering Securities Litigation, 21 MC 92 (SAS). Defendants in these cases filed an omnibus motion to dismiss on common pleading issues. All claims against our officers and directors
have been dismissed without prejudice in this litigation pursuant to the parties stipulation approved by the Court on October 9, 2002. On February 19, 2003, the Court denied in part and granted in part the omnibus motion to dismiss
filed on behalf of defendants, including us and Wink Communications. The Courts order dismissed all claims against us and Wink Communications except for a claim brought under Section 11 of the Securities Act of 1933.

In 2007, a settlement that had been pending with the Court since 2004 was terminated by stipulation of the parties, after a ruling by the
Second Circuit Court of Appeals in six focus cases in the IPO litigation (neither OpenTV nor Wink Communications is a focus case) made it unlikely that the settlement would receive final Court approval. Plaintiffs filed
amended master allegations and amended complaints in the six focus cases. In 2008, the Court largely denied the defendants motion to dismiss the amended complaints.

The parties have recently reached a global settlement of the litigation. Under the settlement, which remains subject to Court
approval, the insurers would pay the full amount of settlement share allocated to us and to Wink Communications, and we would bear no financial liability. We, as well as the officer and director defendants (including the
OpenTV officer and director defendants who were previously dismissed from the action pursuant to tolling agreements), would receive complete dismissals from the case. It is uncertain whether the settlement will receive
final Court approval. If the settlement does not receive final Court approval and litigation against us and Wink Communications continues, we believe we have meritorious defenses and intend to defend ourselves vigorously. No provision
has been made in our consolidated financial statements for this matter. We are unable to predict the likelihood of an unfavorable outcome or estimate our potential liability, if any.

Other Matters.From time to time in the ordinary course of our business, we are also party to other legal proceedings or receive correspondence
regarding potential or threatened legal proceedings. While we currently believe that the ultimate outcome of these other proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or overall
trends in our results of operations, legal proceedings are subject to inherent uncertainties.



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|Item 1A. | Risk Factors
|-------- | ------------

Based on
information available to management as of the date of this Quarterly Report on Form 10-Q, management has determined that no material changes are required to the risk factor disclosure as reported in our Annual Report on Form 10-K for the
year ended December 31, 2008.



|Item 5. | Other Information
|------- | -----------------

On
May 4, 2009, our board of directors approved bonus awards under our 2008 employee bonus plan for the named executive officers identified in Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2008 (the
Form 10-K/A) filed with the Securities and Exchange Commission on April 30, 2009. The 2008 bonus awards for the named executive officers, together with their total compensation for 2008, is set forth in the table below. The total
compensation for 2008 for each named executive officer reported in the Summary Compensation Table on page 9 of the Form 10-K/A has been recalculated below to include the 2008 bonus award.



|                                                      |  |                 |         |                        |   |          
|----------------------------------------------------- |  | --------------- | ------- | ---------------------- | - | ---------
|Name and Principal Position                           |  | 2008 BonusAward |         | Total 2008Compensation
|Nigel W. Bennett                                      |  | $               | 300,000 |                        | $ | 1,297,104
|Chief Executive Officer                               |  |                 |         |                        |   |          
|Shum Mukherjee                                        |  | $               | 117,000 |                        | $ | 757,375  
|Executive Vice President & Chief Financial Officer    |  |                 |         |                        |   |          
|Mark Beariault                                        |  | $               | 105,000 |                        | $ | 554,871  
|Senior Vice President, General Counsel and Secretary  |  |                 |         |                        |   |          
|Michael Ivanchenko                                    |  | $               | 70,721  |                        | $ | 547,810  
|Senior Vice President, Sales                          |  |                 |         |                        |   |          
|Joel Zdepski                                          |  | $               | 105,000 |                        | $ | 540,054  
|Senior Vice President and General Manager, Middleware |  |                 |         |                        |   |          



|Item 6. | Exhibits
|------- | --------

(a) Exhibits. Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):



|     |  |                                        
|---- |  | ---------------------------------------
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification*
|     | 
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification*
|     | 
|32   |  | Section 1350 Certification**           



|* | Filed herewith
|- | --------------



|** | Furnished herewith
|-- | ------------------



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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                    |  |  |  |                                       
|------------------- |  |  |  | --------------------------------------
|                    |  |  |  | OpenTV Corp.                          
|                    |  | 
|Dated: May 11, 2009 |  |  |  | /s/ Shum Mukherjee                    
|                    |  |  |  | Shum Mukherjee Chief Financial
Officer



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Exhibit Index



|              |  |                                        
|------------- |  | ---------------------------------------
|ExhibitNumber |  | Description                            
|              | 
|31.1          |  | Rule 13a-14(a)/15d-14(a) Certification*
|              | 
|31.2          |  | Rule 13a-14(a)/15d-14(a) Certification*
|              | 
|32            |  | Section 1350 Certification**           



|* | Filed herewith
|- | --------------



|** | Furnished herewith
|-- | ------------------



42