UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


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





For the
quarterly period ended September 30, 2008





or





o
            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: 000-53413


Macrovision
Solutions Corporation


(Exact
name of registrant as specified in its charter)




Delaware
            26-1739297(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)2830
      De La Cruz Boulevard, Santa Clara, CA 95050(Address
      of principal executive offices)
            (Zip
      Code)





(408)
562-8400


(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  X  No
____





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





Large
accelerated filerX   Accelerated
filer____  Non-accelerated filer____  Smaller reporting
company___


(Do
not check if a 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  X





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.


Class
            Outstanding
      as of October 31, 2008Common
      stock, $0.001 par value
            102,999,942
















MACROVISION
SOLUTIONS CORPORATION


FORM
10-Q


INDEX





PART
I - FINANCIAL INFORMATION


Page







Item 1.
            Unaudited
      Financial StatementsCondensed
      Consolidated Balance Sheets as of September 30, 2008
            1and December 31, 2007Condensed
      Consolidated Statements of Income
            2for the Three and Nine Months Ended September 30, 2008 and 2007Condensed
      Consolidated Statement of Stockholders’ Equityfor
      the Nine Months Ended September 30, 2008
            3Condensed
      Consolidated Statements of Cash Flowsfor the Nine Months Ended September 30, 2008 and 2007
            4Notes
      to Condensed Consolidated Financial Statements
            5Item 2.
            Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations
            24Item 3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            33Item 4.
            Controls
      and Procedures
            34PART
      II - OTHER INFORMATIONItem 1.
            Legal
      Proceedings
            36Item 1A.
            Risk
      Factors
            38Item 2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            38Item 3.
            Defaults
      Upon Senior Securities
            38Item 4.
            Submission
      of Matters to a Vote of Security Holders
            39Item 5.
            Other
      Information
            39Item 6.
            Exhibits
            39Signatures
            
            41





PART
I. FINANCIAL
INFORMATION


Item 1.   Financial Statements





MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands)


(Unaudited)





ASSETS




September
      30,
              
              December
      31,2008
              
              2007Current
      assets:Cash and cash equivalents
              $             
      268,734
              
              $        134,070Short-term investments
              21,494
              
              248,194Trade accounts receivable, net
              77,804
              
              44,327Deferred tax assets, net
              6,734
              
              4,563Prepaid expenses and other current assets
              15,460
              
              12,135Assets held for sale
              582,690
              
              79,503Total
      current assets
              972,916
              
              522,792Long-term marketable securities
              78,676
              
              57,025Deferred tax assets, net
              -
              
              57,850Property and equipment, net
              51,507
              
              10,011Finite-lived intangible assets, net
              938,309
              
              78,801Other assets
              63,191
              
              11,470Goodwill
              1,183,839
              
              199,209$     
         3,288,438
              
              $        937,158


LIABILITIES
      AND STOCKHOLDERS’ EQUITY





Current
      liabilities:Accounts payable
              $  10,845
              
              $ 6,157Accrued expenses
              77,794
              
              39,625Taxes payable
              8,100
              
              1,355Deferred revenue
              18,096
              
              7,494Current portion of debt and capital lease obligations
              6,179
              
              1,488Liabilities held for sale
              210,948
              
              27,959Total
      current liabilities
              331,962
              
              84,078Taxes
      payable, less current portion
              76,366
              
              57,026Long-term
      debt and capital lease obligations, less current portion
              883,125
              
              240,400Deferred
      revenue, less current portion
              5,484
              
              -Deferred
      tax liabilities, net
              256,328
              
              -Other
      non current liabilities
              5,264
              
              361,558,529
              
              381,540Stockholders’
      equity:Common stock
              110
              
              61Treasury stock
              -
              
              (138,448)Additional paid-in capital
              1,570,054
              
              478,951Accumulated other comprehensive (loss) income
              (5,480)
              
              12,407Retained earnings
              165,225
              
              202,647Total
      stockholders’ equity
              1,729,909
              
              555,618$      3,288,438
              
              $        937,158




See the
accompanying notes to the unaudited condensed consolidated financial
statements.




- 1
-


MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(In
thousands, except per share data)


(Unaudited)




Three
      Months Ended
              
              Nine
      Months EndedSeptember
      30,
              
              September
      30,2008
              
              2007
              
              2008
              
              2007Revenues
              $ 112,200
              
              $       
       45,605
              
              $      218,209
              
              $  103,079Costs
      and expenses:Cost of revenues
              16,347
              
              1,694
              
              33,761
              
              7,177Research and development
              22,314
              
              3,292
              
              45,172
              
              9,805Selling and marketing
              19,920
              
              4,716
              
              43,777
              
              18,456General and administrative
              18,092
              
              8,657
              
              41,297
              
              22,501Depreciation
              5,281
              
              1,256
              
              10,215
              
              4,014Amortization
              21,020
              
              1,382
              
              39,382
              
              4,077Restructuring and asset impairment charges
              -
              
              163
              
              -
              
              3,244Total costs and expenses
              102,974
              
              21,160
              
              213,604
              
              69,274Operating
      income from continuing operations
              9,226
              
              24,445
              
              4,605
              
              33,805Interest expense
              (16,124)
              
              (1,969)
              
              (29,417)
              
              (5,798)Interest income and other, net
              2,397
              
              6,859
              
              10,496
              
              16,903Gain on sale of strategic investments
              -
              
              -
              
              5,238
              
              -(Loss)
      income from continuing operations before income taxes
              (4,501)
              
              29,335
              
              (9,078)
              
              44,910Income
      tax (benefit) expense
              (14,453)
              
              1,316
              
              (17,140)
              
              7,786Income
      from continuing operations, net of tax
              9,952
              28,019
              
              8,062
              
              37,124Discontinued
      operations, net of tax
              (1,162)
              
              (13,927)
              
              92,964
              
              (14,832)Net
      income
              $                8,790
              
              $         14,092
              
              $          
               101,026
              
              $               22,292Basic
      earnings per share:Basic income per share from continuing operations
              $      
                0.10
              
              $              0.52
              
              $  0.10
              
              $                   0.70Basic income (loss) per share from discontinued operations
              $      
               (0.01)
              
              $            (0.26)
              
              $  1.15
              
              $                  (0.28)Basic net earnings per share
              $         
             0.09
              
              $              0.26
              
              $  1.25
              
              $                   0.42Shares
      used in computing basic net earnings per share
              102,912
              
              54,401
              
              81,104
              
              53,342Diluted
      earnings per share:Diluted income per share from continuing operations
              $      
                0.10
              
              $               0.51
              
              $         
         0.10
              
              $                  0.68Diluted income (loss) per share from discontinued
    operations
              $       
              (0.01)
              
              $             (0.25)
              
              $                 
           1.14
              
              $                 (0.27)Diluted net earnings per share
              $         
              0.09
              
              $               0.26
              
              $                 
           1.24
              
              $                  0.41Shares
      used in computing diluted net earnings per share
              103,027
              
              55,060
              
              81,203
              
              54,344


See the
accompanying notes to the unaudited condensed consolidated financial
statements.


- 2
-







MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


(In
thousands, except per share data)


(Unaudited)








Common
      stock
            Treasury
      Stock
            Additional
            Accumulated
      other comprehensive
            Retained
            Total
              Stockholders’Shares
            Amount
            Shares
            Amount
            paid-in
      capital
            (loss)
      income
            earnings
            EquityBalance
      as of December 31, 2007
            61,247,443
            $    61
            (7,434,519)
            $   (138,448)
            $      478,951
            $   
          12,407
            $   202,647
            $    
      555,618Comprehensive
      income
            -
            -
            -
            -
            -
            (17,887)
            101,026
            83,139Issuance of common stock under
      employee stock  plans
            523,105
            -
            -
            -
            7,384
            -
            -
            7,384Equity-based
      compensation
            -
            -
            -
            -
            11,292
            -
            -
            11,292Issuance
      of common stock in connection with the Gemstar acquisition
            48,663,613
            49
            -
            -
            1,072,427
            -
            -
            1,072,476Cancellation of treasury
      stock
            (7,434,519)
            -
            7,434,519
            138,448
            
            -
            (138,448)
            -Balances
      as of September 30, 2008
            102,999,642
            $  110
            -
            $     
                  -
            $  1,570,054
            $   
         (5,480)
            $   165,225
            $  1,729,909








See the
accompanying notes to the unaudited condensed consolidated financial
statements.








- 3
-








MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)




Nine
      Months EndedSeptember
      30,2008
              
              2007Cash
      flows from operating activities:Net
      income
              $     101,026
              
              $       22,292Adjustments
      to reconcile net income to net cash provided by
operations:Loss from discontinued operations, net of tax
              9,964
              
              14,832Gain on sale of Software and Games
              (151,284
              )
              -Depreciation and amortization
              49,597
              
              8,091Amortization of note issuance costs
              3,332
              
              1,083Equity-based compensation
              9,366
              
              7,016Deferred taxes
              16,117
              
              -Gain on sale of strategic investment
              (5,238
              )
              -Changes
      in operating assets and liabilities, net of assets and liabilities
      acquired:Accounts receivable, net
              4,371
              
              (6,858
              )Deferred revenue
              12,158
              
              (432
              )Prepaid expenses, other current assets and other assets
              15,362
              
              (3,094
              )Taxes payable, net
              (8,096
              )
              4,880Accounts payable, accrued expenses, and other long-term
      liabilities
              (38,306
              )
              (6,227
              )Net
      cash provided by operating activities of continuing
    operations
              18,369
              
              41,583Net
      cash provided by operating activities of discontinued
      operations
              19,658
              
              15,901Net
      cash provided by operating activities
              38,027
              
              57,484Cash
      flows from investing activities:Purchases
      of long and short term marketable investment securities
              (185,758
              )
              (993,788
              )Sales
      or maturities of long and short term marketable
investments
              385,659
              
              960,494Acquisition
      of Gemstar, net of cash acquired
              (910,742
              )
              -Proceeds
      from sale of Software and Games
              195,091
              
              -Payments
      for other acquisitions, net of cash acquired
              -
              
              (2,292
              )Purchases
      of property and equipment
              (5,312
              )
              (718
              )Other
      investing
              (828
              )
              (1,127
              )Net
      cash used in investing activities of continuing operations
              (521,890
              )
              (37,431
              )Net
      cash used in investing activities of discontinued
    operations
              (556
              )
              (4,796
              )Net
      cash used in investing activities
              (522,446
              )
              (42,227
              )Cash
      flows from financing activities:Purchase
      of treasury stock
              -
              
              (50,000
              )Principal
      payments under capital lease and debt obligations
              (2,959
              )
              (1,084
              )Proceeds
      from issuance of debt, net of issuance costs
              615,469
              
              -Proceeds
      from exercise of options and other financing activities
              7,985
              
              55,948Net
      cash provided by financing activities of continuing
    operations
              620,495
              
              4,864Net
      cash used in financing activies of discontinued operations
              (274
              )
              -Net
      cash provided by financing activities
              620,221
              
              4,864Effect
      of exchange rate changes on cash
              (1,138
              )
              447Net
      increase in cash and cash equivalents
              134,664
              
              20,568Cash
      and cash equivalents at beginning of period
              134,070
              
              159,666Cash
      and cash equivalents at end of period
              $     268,734
              
              $     180,234






See the
accompanying notes to the unaudited condensed consolidated financial
statements.





- 4
-


MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





NOTE
1 – BASIS OF PRESENTATION




On
December 6, 2007, Macrovision Corporation and Gemstar-TV Guide International,
Inc. (“Gemstar”) entered into an agreement for Macrovision Corporation to
acquire Gemstar in a cash and stock transaction.  Upon consummation of
this transaction on May 2, 2008, Macrovision Solutions Corporation, a Delaware
corporation founded in 2007, assumed ownership of both Gemstar and Macrovision
Corporation.  The common stock of Macrovision Corporation and Gemstar
were de-registered and Macrovision Corporation stockholders were provided one
share in Macrovision Solutions Corporation (the “Company”) for each share of
Macrovision Corporation common stock owned as of the closing.  In
addition, all treasury stock held by Macrovision Corporation was
cancelled.  Macrovision Corporation is the predecessor registrant to
Macrovision Solutions Corporation and therefore, for periods prior to May 2,
2008, the consolidated financial statements reflect the financial position and
results of operations and cash flows of Macrovision Corporation.  The
Company’s results of operations include the operations of Gemstar from May 2,
2008, forward.  The Company’s TV Guide Magazine business maintains a
52-53 week fiscal year ending on the Sunday nearest December 31.





On April
1, 2008, the Company closed the sale of its software and games businesses
(hereafter referred to as “Software” and “Games”, respectively). As of December
31, 2007, the Company has reported the assets and liabilities of Software and
Games as held for sale.  In the second quarter of 2008, the Company
determined it was probable that it would divest its TV Guide Magazine and
RightCommerce (also known as “eMeta”) businesses.  In addition, in the
third quarter of 2008, the Company determined it was probable that it would
divest its TV Guide Network and TVG Network businesses.  As of
September 30, 2008, the Company has reported the assets and liabilities of TV
Guide Magazine, TV Guide Network, TVG Network and eMeta as held for
sale.  The results of operations and cash flows of Software, Games, TV
Guide Magazine, TV Guide Network, TVG Network and eMeta have been classified as
discontinued operations for all periods presented. See Note
3.  With the inclusion of the above businesses in discontinued
operations, the Company now has one reportable business segment.





The
accompanying unaudited Condensed Consolidated Financial Statements have been
prepared by Macrovision Solutions Corporation and its subsidiaries in accordance
with the rules and regulations of the Securities and Exchange Commission
(“SEC”).  Certain information and footnote disclosures, normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, have been
condensed or omitted in accordance with such rules and
regulations.  However, the Company believes the disclosures are
adequate to make the information not misleading.  In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, which in the opinion of management are considered necessary to
present fairly the results for the periods presented.  This quarterly
report on Form 10-Q should be read in conjunction with the audited financial
statements and notes thereto and other disclosures, including those items
disclosed under the caption “Risk Factors” contained in Macrovision
Corporation’s 2007 Annual Report on Form 10-K/A and Macrovision Solutions
Corporation’s Form 10-Q for the quarterly periods ended March 31, 2008 and June
30, 2008.





The
Condensed Consolidated Statements of Income for the interim periods presented
are not necessarily indicative of the results expected for the entire year
ending December 31, 2008, for any future year, or for any other future interim
period.





Certain
prior period amounts have been reclassified to conform to the current period
presentation.




- 5 -





NOTE
2 – ACQUISITIONS





Gemstar
Acquisition





On May 2,
2008, the Company acquired Gemstar in a cash and stock
transaction.  Gemstar was a technology, media and entertainment
company that developed, licensed, marketed and distributed products and services
targeted at the video guidance and entertainment needs of consumers
worldwide.





The
Company is accounting for the transaction under the purchase method of
accounting in accordance with the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 141, “Business Combinations”. The total
purchase price for Gemstar was approximately $2.65 billion and was comprised of
the following (in thousands):


Fair
      value of Macrovision Solutions Corporation stock issued
            $       1,072,476Cash
      consideration paid to Gemstar stockholders
            1,516,309Cash
      consideration paid for employee options and restricted stock
      units
            30,374Acquisition
      related transaction costs
            32,379Total
      purchase price
            $      2,651,538





Upon
closing this transaction, each share of Gemstar stock was converted, based upon
each individual stockholder’s election, into $6.35 in cash or 0.2548 of a share
of common stock in Macrovision Solutions Corporation. Cash elections were
prorated such that, in the aggregate, Gemstar security holders received cash
consideration of approximately $1.5 billion.  The Company issued
approximately 48.7 million shares to Gemstar stockholders as part of the
transaction.  The fair value of Macrovision Solutions Corporation’s
shares issued in the transaction was based on a price of $22.04 per share, which
represents the average closing price of Macrovision Corporation shares for the
five trading days beginning two trading days before and ending two trading days
after December 7, 2007, the date on which the acquisition was
announced.  Gemstar stock options and restricted stock units
outstanding immediately prior to the closing were cancelled and the holders were
paid cash per share in an amount equal to the $6.35 in cash per share less the
exercise price.  Acquisition related costs include legal, investment
banking, accounting fees and other external costs directly related to the
acquisition.





The
Company, based upon estimated fair values as of May 2, 2008, made a preliminary
allocation of the estimated purchase price to the net tangible and intangible
assets acquired.  The excess of the purchase price over the estimated
fair value of the underlying net tangible and intangible assets has been
recorded as goodwill.  The Company acquired Gemstar to increase its
product offerings and believes the combined Company’s complementary solutions
will lead to increased market opportunity and an expanded customer
base.  The combination of the Company and Gemstar also provides the
opportunity for cost savings.  The Company believes these factors
support the amount of goodwill recorded.  The preliminary allocation
of purchase price is based upon a preliminary valuation and our estimates and
assumptions are subject to change within the purchase price allocation
period.  The Company’s preliminary purchase price allocation is as
follows (in thousands):


Cash
      and cash equivalents
            $        663,618Trade
      accounts receivable
            74,848Property
      and equipment
            73,043Goodwill
            1,283,358Identifiable
      intangible assets
            1,118,570Other
      assets
            61,045Accounts
      payable and other liabilities
            (135,833)Restructuring
      charge (See note 8)
            (21,162)Deferred
      tax liabilities, net
            (368,590)Deferred
      revenue
            (85,461)Capital
      lease obligations
            (11,898)Total
      purchase price
            $      2,651,538





- 6
-


Identifiable
Intangible Assets





The following sets forth the
preliminary components of intangible assets associated with the Gemstar
acquisition (in thousands, except years):





Amount
            Weighted
      Average Estimated Useful
              Life
      (Years)Developed
      technology and patents
            $         774,080
            13Trademarks/Tradenames
            141,630
            20Customer
      relationships
            184,050
            14Content
      database
            18,810
            15Total
      identifiable intangible assets
            $      1,118,570





Developed
technology and patents relate to Gemstar’s products that are technologically
feasible and Gemstar’s patents.  Trademarks/Tradenames are primarily
related to Gemstar’s brands and tradenames acquired.  Customer
relationships represent existing contracts that relate primarily to underlying
customer relationships.  Content represents the database of program
listings and descriptions gathered over time.  Identifiable intangible
assets will be amortized on a straight-line basis over their estimated useful
lives.





Other
Acquisition Related Matters





Operating
leases related to Gemstar businesses have total future minimum payments of
$52.8 million as of September 30, 2008.  These payments become due as
follows: remainder of 2008 - $3.6 million, 2009- $11.5 million, 2010- $8.0
million, 2011 - $6.7 million, 2012 – $6.3 million and thereafter $16.8
million.  The capital lease for a satellite transponder used by the TV
Guide Network has total future minimum payments of $17.5 million, with $1.6
million payable each year through 2019.





On May 2,
2008, in connection with its acquisition of Gemstar, Macrovision Solutions
Corporation and Macrovision Corporation, as co-obligors, entered into a $550
million five year senior secured term loan credit facility and issued $100
million aggregate principal amount of 11% senior notes due 2013.  In
the event (i) the Company’s leverage ratio is greater than 2.5 to 1.0, and (ii)
more than $50 million in aggregate principal amount of Macrovision Corporation’s
2.625% convertible senior notes due 2011 is still outstanding, and (iii) the
scheduled maturity of the 2.625% convertible senior notes due 2011 is more than
181 days in the future, then the term loans under our senior secured term loan
credit facility will become due on that 182nd day prior to the 2.625%
convertible senior notes maturity date.  The Company may redeem some
or all of the 11% senior notes due 2013 at any time on or after November 15,
2009 at a price equal to 100% of principal amount of notes to be redeemed. In
addition, the Company may redeem these notes, in whole or in part, at any time
before November 15, 2009 at a redemption price plus a “make-whole” premium. The
Company must offer to purchase the notes if it experiences specific kinds of
changes of control or sells assets under certain circumstances.





2007
Acquisitions





All Media Guide Holdings,
Inc.





In December, 2007, the Company acquired
All Media Guide Holdings, Inc. (“AMG”), a privately-held company based in
Michigan, for a total of $82.3 million of purchase consideration, in a taxable
transaction.  AMG was one of the world’s largest providers of
information databases and metadata for entertainment products (music, movies,
and games) as well as solutions that support the recognition, discovery and
management of digital media.




- 7
-


Self
Protecting Digital Content (“SPDC”)Technology




In November
2007, the Company acquired SPDC from a privately held business in a taxable
transaction, for $45.2 million, plus warrants exercisable for 0.9 million shares
of Macrovision stock valued at $8.4 million.  SPDC focused on solving
complex digital security problems.





Mediabolic





On January 1, 2007, the Company
acquired Mediabolic, Inc. (“Mediabolic”), a privately held company based in San
Mateo, California, for $43.6 million.  Mediabolic was a provider of
software solutions for connected consumer electronics devices, such as
televisions, set-top boxes and digital video recorders.





Pro
Forma Financial Information





The pro forma financial information
presented below (in thousands) assumes the acquisition of Gemstar, AMG, and
SPDC had occurred on January 1, 2007.  The pro forma financial
information does not include the results of Software, Games, TV Guide Magazine,
TV Guide Network, TVG Network and eMeta as these businesses have been classified
as discontinued operations.  The Company anticipates it will receive
net proceeds of between $350 million and $400 million from the sales of TV Guide
Magazine, TV Guide Network, TVG Network and eMeta.  The pro forma
financial information assumes $350 million of net proceeds from the sale of
these businesses was used to reduce the amount of debt outstanding as of January
1, 2007.  The pro forma information presented is for illustrative
purposes only and is not necessarily indicative of the results of operations
that would have been realized if the acquisition had been completed on the date
indicated, nor is it indicative of future operating results. The pro forma
financial information does not include any adjustments for operating
efficiencies or cost savings.








Three
      months ended
              September
      30,
            
            Nine
      Months ended
              September
      30,2008
            
            2007
            
            2008
            
            2007Net
      revenue
            $
      112,200
            
            $
      109,245
            
            $
      325,927
            
            $
      303,389Operating
      income (1)
            9,226
            
            4,363
            
            43,170
            
            13,265Income
      (loss) from continuing operations (1)
            14,097
            
            12,969
            
            34,116
            
            (8,103)Basic
      and diluted earnings (loss) per share from continuing
      operations
            0.14
            
            0.13
            
            0.33
            
            (0.08)





(1)
            The
      nine months ended September 30, 2008, includes a $32.5 million pre-tax
      benefit from a Gemstar insurance settlement.  The nine months
      ended September 30, 2007, includes a $10.7 million pre-tax benefit from
      the resolution of matters related to a former Gemstar
  CEO.








- 8
-


NOTE
3 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE





On April
1, 2008, an affiliate of Thoma Bravo acquired the Company’s Software business
unit in a cash transaction valued at $200 million adjusted by the difference
between working capital at closing, as defined in the sales agreement, and $28
million.  The net sales price with the working capital adjustment was
$191 million.  On April 1, 2008, the Company sold its Games business
to RealNetworks for $4 million in cash.





As of December 31, 2007, the assets and liabilities of Software and
Games are presented as held for sale, and results of operations and cash flows
of Software and Games have been classified as discontinued operations, for all
periods presented.





The
assets and liabilities attributable to the Software business classified in the
Condensed Consolidated Balance Sheet as held for sale consist of the following
(in thousands):





December
      31,
              2007Accounts
      receivable, net
            $       25,361Property
      and equipment, net
            1,735Other
      assets
            1,260Intangible
      assets
            7,634Goodwill
            39,355Deferred
      revenue
            (27,959)Total
      net assets held for sale
            $       47,386







The
assets attributable to the Games business classified in the Consolidated Balance
Sheet as assets held for sale consist of the following (in
thousands):


December
      31,
              2007Property
      and equipment, net
            $             702Identifiable
      intangibles
            999Goodwill
            2,457Total
      net assets held for sale
            $         4,158








The assets and liabilities attributable
to the TV Guide Magazine business classified in the Condensed Consolidated
Balance Sheet as held for sale consist of the following (in
thousands):






September
      30,
              2008Accounts
      receivable, net
            $    21,941Property
      and equipment, net
            720Other
      assets
            8,653Intangible
      assets
            14,910Goodwill
            33,008Accounts
      payable and other liabilities
            (13,143)Deferred
      taxes, net
            (5,960)Deferred
      revenue
            (69,129)Total
      net liabilities held for sale
            $   (9,000)







- 9
-








The
assets and liabilities attributable to the Company’s Media Networks businesses
(TV Guide Network and TVG Network) classified in the Condensed Consolidated
Balance Sheet as held for sale consist of the following (in
thousands):






September
      30,
              2008Accounts
      receivable, net
            $   18,337Property
      and equipment, net
            21,506Other
      assets
            5,807Intangible
      assets
            196,696Goodwill
            259,790Accounts
      payable and other liabilities
            (34,649)Capital
      lease
            (11,624)Deferred
      taxes, net
            (65,951)Deferred
      revenue
            (9,205)Total
      net assets held for sale
            $
      380,707





The assets and liabilities attributable
to the eMeta business classified in the Condensed Consolidated Balance Sheet as
held for sale consist of the following (in thousands):






September
      30,
              2008Accounts
      receivable, net
            $    1,064Property
      and equipment, net
            191Other
      assets
            67Accounts
      payable and other liabilities
            (461)Deferred
      revenue
            (826)Total
      net assets held for sale
            $        35





Based on the non-binding offers the
Company received in the third quarter of 2008 to acquire the eMeta business, it
became apparent the Company needed to reassess its outlook for this
business.  The Company conducted an analysis to estimate the fair
value of eMeta’s goodwill and intangible assets.  As a result, the
Company recorded impairment charges totaling $5.3 million for goodwill and $1.4
million for the intangible assets of eMeta.  These impairment charges
were recorded in discontinued operations for the three and nine months ended
September 30, 2008.





- 10
-


The results of operations of the Company’s discontinued businessesconsist of the following (in thousands):




Three
      Months Ended
              
              Nine
      Months EndedSeptember
      30,
              
              September
      30,2008
              
              2007
              
              2008
              
              2007Net
      revenue:Software
              $               -
              
              $     26,488
              
              $    27,503
              
              $      81,220Games
              -
              
              1,787
              
              1,633
              
              7,360eMeta
              1,712
              
              2,891
              
              5,624
              
              7,380TV
      Guide Magazine
              30,859
              
              -
              
              50,636
              
              -Media
      Networks:TV
      Guide Network
              29,387
              
              -
              
              48,390
              
              -TVG
      Network
              15,584
              
              -
              
              24,418
              
              -Pre-tax
      (loss) incomeSoftware
              $       (322
              )
              $       2,705
              
              $     (7,187
              )
              $      11,312Games
              -
              
              (12,808
              )
              (2,551
              )
              (24,208
              )eMeta
              (7,487
              )
              (399
              )
              (11,032
              )
              (3,042
              )TV
      Guide Magazine
              (4,851
              )
              -
              
              (6,522
              )
              -Media
      Networks
              8,092
              
              -
              
              10,869
              
              -Pre-tax
      gain on disposal of software and games
              -
              
              -
              
              151,284
              
              -Income
      tax (expense) benefit
              3,406
              
              (3,425
              )
              (41,897
              )
              1,106Income (loss) from discontinued operations, net of tax
              $    (1,162
              )
              $    (13,927
              )
              $    92,964
              
              $     (14,832
              )





NOTE
4 – FAIR VALUE MEASUREMENTS





On
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value”
(“SFAS 157”), except as it applies to those non-financial assets and
non-financial liabilities as noted in FSP FAS 157-2, (the “FSP”) issued by
the Financial Accounting Standards Board (the “FASB”) in February 2008. The
non-financial assets and liabilities include items such as reporting units
measured at fair value in a goodwill impairment test and non-financial assets
acquired and liabilities assumed in a business combination.  The FSP
defers the effective date of SFAS 157 identified for non-financial assets
and liabilities to fiscal years beginning after November 15, 2008, and
interim periods within those fiscal years. The adoption of SFAS 157 primarily
affected disclosure requirements and did not impact the Company’s financial
position or operating results.





On
January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities” (“SFAS 159”).  SFAS
159 permits companies to choose to measure certain financial instruments and
certain other items at fair value. The standard requires that unrealized gains
and losses on items for which the fair value option has been elected be reported
in earnings. The Company has not chosen to present any of the eligible
instruments using the fair value option. Therefore, the adoption of
SFAS 159 in the first quarter of fiscal 2008 did not have an impact on the
Company’s consolidated financial statements.





SFAS 157
establishes a three−tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value. These tiers include:  Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.





As of
September 30, 2008, the Company held money market funds, fixed income securities
and auction rate securities that are required to be measured at fair value on a
recurring basis.  The following inputs were used to determine the fair
value of these securities at September 30, 2008 (in thousands):




- 11
-


Quoted
      Prices in Active Markets
                for
      Identical
                Assets
              Significant
      Other Observable
                Inputs
              Significant
      Unobservable InputsTotal
              
              (Level 1)
              
              (Level 2)
              
              (Level 3)Money
      market funds
              
              $      145,519
              
              $             145,519Fixed
      income available-for-sale securities
              
              118,618
              
              
              
              118,618Auction
      rate securities
              
              72,627
              
              
              
              
              
              72,627Total
              
              $      336,764
              
              $             145,519
              
              $             118,618
              
              $               72,627




The
Company’s fixed income available-for-sale securities consists of corporate debt
securities, US Treasuries and municipal securities.





The
Company’s auction rate security instruments are classified as available-for-sale
securities and reflected at fair value. However, due to recent events in credit
markets, the interest rate reset auction events for these instruments failed
during 2008. Therefore, the fair values of these securities are estimated taking
into account such factors as likelihood of redemption, credit quality, duration,
insurance wraps and expected future cash flows. These securities were also
compared, when possible, to other observable market data with similar
characteristics to the securities held by the Company.





As a
result of the temporary declines in fair value for the Company's auction rate
securities, which the Company attributes to liquidity issues rather than credit
issues, it has recorded an unrealized loss of $6.8 million to accumulated other
comprehensive income as of  September 30, 2008. The Company’s auction
rate securities portfolio at September 30, 2008 includes solely AAA rated
investments, comprised of federally insured student loans and municipal and
educational authority bonds. Due to the Company's belief that the market for
such securities may take in excess of twelve months to fully recover and because
the Company has the ability and intent to hold these investments until the
market recovers, the Company has classified these investments as long-term
marketable securities on the Condensed Consolidated Balance Sheet at September
30, 2008. The Company continues to earn interest on all of its auction rate
security instruments. Any future fluctuation in fair value related to these
instruments that the Company deems to be temporary, including any recoveries of
previous write−downs, would be recorded to accumulated other comprehensive
income. If the Company determines that any future valuation adjustment is other
than temporary, it will record a charge to earnings as appropriate.




The
following table provides a summary of changes in the Company’s Level 3 auction
rate securities as of September 30, 2008 (in thousands):






Auction
      Rate SecuritiesBalance
      at December 31, 2007
              $       89,600Unrealized
      loss included in accumulated other comprehensive income
              (6,848
              )Purchases
      and settlements, net
              (10,125
              )Balance
      at September 30, 2008
              $       72,627







- 12
-


NOTE
5 – EQUITY-BASED COMPENSATION




At a
special meeting of the Company’s stockholders held on July 15, 2008, the
stockholders approved the 2008 Equity Incentive Plan (the "2008 Plan") and the
2008 Employee Stock Purchase Plan (the "2008 ESPP"). The Company will no longer
make award grants under the 2000 Equity Incentive Plan (the “2000 Plan”), except
with respect to award grants made to the Company’s chief executive officer and
will no longer make award grants under the Gemstar-TV Guide International, Inc.
2007 Long-Term Incentive Plan.  The 2008 ESPP replaced the 1996
Employee Stock Purchase Plan, but did not affect the continuation of the final
offering period of the 1996 ESPP that commenced in February 2008 under the terms
of that plan.  In the second quarter of 2008, the Company terminated
the 1996 Directors Stock Option Plan in connection with the closing of the
Gemstar acquisition.




Stock
Options Plans




During
the quarter ended September 30, 2008, the Company granted options and restricted
stock from the 2008 and 2000 Plans.




As
of September 30, 2008, the Company had 29.6 million shares reserved and
15.7 million shares remained available for issuance under the 2008 and 2000
Plans. The 2008 and 2000 Plans provide for the grant of stock options,
restricted stock awards and similar types of equity awards by the Company to
employees, officers, directors and consultants of the Company.  For
options granted during the third quarter of 2008, the vesting period was four
years where one quarter of the option vests at the end of the first year, and
the remainder vests monthly.  For options granted prior to the third
quarter, the vesting periods were generally three years where one-sixth of the
option vests in the first year, one-third vests in the second year and the
remainder vests in the third year. Option grants have contractual terms ranging
from five to ten years.




Restricted
stock awards were issued from the 2000 Plan and generally vest annually over
four years. Restricted stock awards are considered outstanding at the time of
the grant, as the stockholders are entitled to dividends and voting rights. As
of September 30, 2008, the number of shares awarded but unvested was
840,000.




Employee
Stock Purchase Plan




The
Company’s 2008 ESPP allows eligible employee participants to purchase shares of
the Company’s common stock at a discount through payroll deductions. The 2008
ESPP consists of a twenty-four-month offering period with four six-month
purchase periods in each offering period. Employees purchase shares in each
purchase period at 85% of the market value of the Company’s common stock at
either the beginning of the offering period or the end of the purchase period,
whichever price is lower.




As
of September 30, 2008, the Company had reserved, and available for future
issuance, 7.5 million shares of common stock for issuance under the
ESPP.





Valuation
and Assumptions




The
Company uses the Black-Scholes option pricing model to determine the fair value
of stock options and employee stock purchase plan shares. The fair value of
equity-based payment awards on the date of grant is determined by an
option-pricing model using a number of complex and subjective variables. These
variables include expected stock price volatility over the term of the awards,
actual and projected employee stock option exercise behaviors, risk-free
interest rate and expected dividends. The Company determines the fair value of
its restricted stock awards as the difference between the market value of the
awards on the date of grant less the exercise price of the awards
granted.




- 13
-




Estimated
volatility of the Company’s common stock for new grants is determined by using a
combination of historical volatility and implied volatility in market traded
options. When historical data is available and relevant, the expected term of
options granted is determined by calculating the average term from historical
stock option exercise experience. When there is insufficient historical exercise
data to provide a reasonable basis upon which to estimate expected term due to
changes in the terms of option grants, the Company has used the “simplified
method” as permitted under Staff Accounting Bulletin No. 110.  For
options granted during the third quarter of 2008, the Company changed its
vesting terms from three to four years and its contractual term from five to
seven years.  Since the Company did not have sufficient data for
options with four year vesting terms and seven year contractual life, the
simplified method was used to calculate expected term.  The risk-free
interest rate used in the option valuation model is from U.S. Treasury
zero-coupon issues with remaining terms similar to the expected term on the
options. The Company does not anticipate paying any cash dividends in the
foreseeable future and therefore uses an expected dividend yield of zero in the
option valuation model. In accordance with SFAS No. 123(R), the Company
estimates forfeitures at the time of grant and revises those estimates in
subsequent periods if actual forfeitures differ from those estimates. The
Company uses historical data to estimate pre-vesting option forfeitures and
records equity-based compensation expense only for those awards that are
expected to vest. The assumptions used to value equity-based payments are as
follows:





Three
      months ended
              September
      30,
            
            Nine
      Months ended
              September
      30,2008
            
            2007
            
            2008
            
            2007Option
      Plans:Dividends
            None
            
            None
            
            None
            
            NoneExpected
      term
            4.6
      years
            
            3.1
      years
            
            3.5
      years
            
            3.1
      yearsRisk
      free interest rate
            2.9%
            
            4.6%
            
            2.8%
            
            4.7%Volatility
      rate
            44%
            
            39%
            
            43%
            
            37%ESPP
      Plan:Dividends
            None
            
            None
            
            None
            
            NoneExpected
      term
            1.2
      years
            
            1.2
      years
            
            1.2
      years
            
            1.2
      yearsRisk
      free interest rate
            2.3%
            
            4.7%
            
            2.2%
            
            4.9%Volatility
      rate
            45%
            
            39%
            
            45%
            
            36%




As
of September 30, 2008, there was $35.7 million of unrecognized compensation cost
for continuing operations, adjusted for estimated forfeitures, related to
non-vested equity-based payments granted to employees. Total unrecognized
compensation cost will be adjusted for future changes in estimated forfeitures
and is expected to be recognized over a weighted average period of 2.7
years.




The
weighted average fair value of options granted during the three and nine months
ended September 30, 2008 was $6.16 and $4.92, respectively.  The
weighted average fair value of options granted during the three and nine months
ended September 30, 2007 was $8.57 and $8.25, respectively.  The
weighted average grant date fair value of an employee purchase share right
granted during the three and nine months ended September 30, 2008 was $3.68 and
$3.98, respectively. The weighted average grant date fair value of an employee
purchase share right granted during the three and nine months ended September
30, 2007 was $4.52 and $7.80, respectively. The weighted average fair value of a
restricted stock award granted during the three and nine months ended September
30, 2008 was $15.52 and $15.50, respectively.  The weighted average
fair value of a restricted stock award granted during the three and nine months
ended September 30, 2007 was $24.77 and $24.86, respectively.




- 14
-




The
total intrinsic value of options exercised during the three and nine months
ended September 30, 2008 was less than $0.1 million and $0.6 million,
respectively. The intrinsic value is calculated as the difference between the
market value on the date of exercise and the exercise price of the
shares.





NOTE
6 – GOODWILL AND OTHER INTANGIBLE ASSETS





The
following table summarizes the Company’s goodwill activity associated with its
continuing operations (in thousands):






Goodwill,
      net at December 31, 2007
            $    199,209Changes
      due to foreign currency exchange rates and other
            (620
            )Gemstar
      acquisition (see Note 2)
            1,283,358Reclassifications
      to held for sale (see Note 3)
            (298,108
            )Goodwill,
      net at September 30, 2008
            $  1,183,839








The
Company’s finite-lived intangible assets associated with its continuing
operations as of September 30, 2008 and December 31, 2007 are as follows (in
thousands):





September
      30, 2008Gross
      Costs
            
            Accumulated
      Amortization
            
            
            NetFinite-lived  intangibles:Developed technology and
      patents
            $  829,471
            
            $  (45,843
            )
            
            $   783,628Existing contracts
      and   customer relationships
            47,162
            
            (6,510
            )
            
            40,652Content
      databases
            44,643
            
            (3,729
            )
            
            40,914Trademarks /
      Tradenames
            75,147
            
            (2,032
            )
            
            73,115$  996,423
            
            $  (58,114
            )
            
            $  938,309







December
      31, 2007Gross
      Costs
            
            Accumulated
      Amortization
            
            
            NetFinite-lived  intangibles:Developed technology and
      patents
            $      61,797
            
            $      (18,995
            )
            
            $      42,802Existing contracts and
      customer relationships
            10,740
            
            (4,176
            )
            
            6,564Content
      database
            25,574
            
            (167
            )
            
            25,407Trademarks /
      Tradenames
            4,403
            
            (375
            )
            
            4,028$    102,514
            
            $      (23,713
            )
            
            $     78,801




- 15
-




As of
September 30, 2008, the Company estimates its amortization expense in future
periods to be as follows (in thousands):






Amortization
              ExpenseRemainder
      of 2008
            
            $   
        20,8182009
            
            82,8522010
            
            80,2402011
            
            77,1682012
            
            76,602Thereafter
            
            600,629Total
      amortization expense
            
            $   938,309





NOTE
7 – STRATEGIC INVESTMENT SALE





During
the first quarter of 2008, the Company sold its investment in Digimarc
Corporation (“Digimarc”) and recorded a gain of $5.2 million.  As of
December 31, 2007, the Digimarc investment was carried at $17.8 million and
classified on the balance sheet as “Long-term marketable
securities.”





NOTE
8 – RESTRUCTURING AND ASSET IMPAIRMENT CHARGES





Gemstar
Acquisition Restructuring Plan





During
the second quarter of 2008, management initiated plans to restructure certain
operations of pre-merger Gemstar resulting in a restructuring liability related
to severance of $18.9 million.  This plan was initiated in order to
create cost efficiencies for the combined Company.  In the third
quarter of 2008 management finalized the restructuring plan and increased the
severance liability by $2.3 million, resulting in a total severance liability of
$21.2 million.  The severance liability was recognized as an assumed
liability in the Gemstar acquisition and, accordingly, resulted in an increase
to goodwill.  The Company has paid $16.5 million of these costs and as
of September 30, 2008, and had a remaining liability of $4.7
million.  Restructuring accruals are classified on the balance sheet
as “Accrued expenses”.  The Company anticipates paying the remaining
liability by the end of the first quarter of 2009.





Fiscal
2007 Restructuring Plans





During
the nine months ended September 30, 2007, the Company recorded $3.2 million in
restructuring charges, consisting of severance benefits of $2.3 million, service
contract cancellations and asset losses of $0.5 million and abandonment of
leased facilities of $0.4 million.





The
following table presents the activity in the restructuring accrual for the nine
months ended September 30, 2008 related to the 2007 restructuring actions (in
thousands):




Termination
              
              
              Contract
              
              
              AbandonmentCharges
      and activity:
              Benefits
              
              
              Terminations
              
              
              Of
      Facilities
              
              
              TotalAccrual
      Balance as of December 31, 2007
              $                    107
              
              
              $                   1,195
              
              
              $                       132
              
              
              $                     1,434Cash
      payments
              (107
              )
              
              (576
              )
              
              (112
              )
              
              (795
              )Accrual
      Balance as of September 30, 2008
              $                         -
              
              
              $                      619
              
              
              $                         20
              
              
              $                       639




The
remaining reserves are expected to be paid by the end of fiscal year
2008.




- 16
-




NOTE
9 – EARNINGS PER SHARE (“EPS”)





Basic net
EPS is computed using the weighted average number of common shares outstanding
during the period.  Diluted EPS is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during the
period except for periods of operating loss for which no common share
equivalents are included because their effect would be
anti-dilutive.  The following table shows the effect of dilutive
common equivalent shares (in thousands):




Three
      months ended
                September
      30,
              Nine
      months ended September 30,2008
              
              2007
              
              2008
              
              2007Basic
      EPS – weighted average number of common shares outstanding
              102,912
              
              54,401
              
              81,104
              
              53,342Effect
      of dilutive common equivalent shares
              115
              
              659
              
              99
              
              1,002Diluted
      EPS – weighted average number of common shares and common equivalent
      shares outstanding
              103,027
              
              55,060
              
              81,203
              
              54,344


The
following weighted average potential common shares were excluded from the
computation of diluted net earnings per share as their effect would have been
anti-dilutive (in thousands):




Three
      months ended
                September
      30,
              Nine
      months ended
                September
      30,2008
              
              2007
              
              2008
              
              2007Stock
      options (1)
              7,251
              
              2,215
              
              5,695
              
              1,647Restricted
      stock (1)
              221
              
              110
              
              453
              
              37Warrants
      (1)
              7,955
              
              7,955
              
              7,955
              
              7,955Convertible
      senior notes (2)
              8,486
              
              8,486
              
              8,486
              
              8,486Total
      weighted average potential common shares excluded from diluted net
      earnings per share
              23,913
              
              18,766
              
              22,589
              
              18,125








(1)
            These
      employee stock options, restricted stock awards and warrants were excluded
      from the computation of diluted net earnings per share because their
      impact is anti-dilutive.  In August 2006, in conjunction with
      the issuance of the 2.625% convertible senior notes, the Company sold
      warrants to purchase up to 7.96 million shares of its common stock at a
      price of $32.9248 per share, expiring on various dates beginning August
      16, 2011. Warrants related to the acquisition of SPDC (see note 2) in
      November 2007 had not been issued to the seller as of September 30, 2008
      and, therefore, have been excluded from the table as an anti-dilutive
      potential common share equivalent.


(2)
            Potential
      common shares related to the 2.625% convertible senior notes were excluded
      from the computation of diluted net income per share because the effective
      conversion price was higher than the average market price of our common
      stock during the period, and therefore the effect was
      anti-dilutive.





- 17
-





NOTE
10 – COMPREHENSIVE INCOME





The
components of comprehensive income, net of taxes, are as follows (in
thousands):






Three
      Months Ended
                September
      30,
              
              Nine
      Months Ended
                September
      30,2008
              
              2007
              
              2008
              
              2007Net
      income
              $    8,790
              
              
              $  14,092
              
              
              $101,026
              
              
              $  22,292Other
      comprehensive (loss) income:Unrealized
      (losses) gains on investments (1)
              (3,188
              )
              
              (582
              )
              
              (7,515
              )
              
              435Foreign
      currency translation adjustments (2)
              (2,389
              )
              
              1,421
              
              
              (10,372
              )
              
              1,845Comprehensive
      income
              $    3,213
              
              
              $  14,931
              
              
              $  83,139
              
              
              $  24,572






(1)
Changes in unrealized (losses) gains on investments during the nine months ended
September 30, 2008 include the reduction of $3.2 million, net of taxes, of
unrealized gains related to Digimarc Corporation.  These unrealized
gains became realized gains when the Company sold this investment during the
first quarter of 2008 (see Note 7).


(2)
Foreign currency translation adjustments during the nine months ended September
30, 2008, include a reduction of $5.0 million due to the sale of Software (see
Note 3).





NOTE
11 – RECENT ACCOUNTING PRONOUNCEMENTS




The FASB
recently issued FASB staff position (FSP) APB 14-1, “Accounting for
Convertible Debt Instruments That May Be Settled in Cash Upon Conversion
(Including Partial Cash Settlement)” (“FSP 14-1”). FSP 14-1 specifies that
issuers of such instruments should separately account for the liability and
equity components in a manner that will reflect the entity’s nonconvertible debt
borrowing rate on the instrument’s issuance date when interest cost is
recognized.  The FSP 14-1 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 periods
presented. Early adoption of FSP 14-1 is not permitted.   The
Company is currently evaluating the impact that FSP 14-1 will have on its
consolidated financial statements.







In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”).
SFAS 161 requires entities that utilize derivative instruments to provide
qualitative disclosures about their objectives and strategies for using such
instruments, as well as any details of credit-risk-related contingent features
contained within derivatives. SFAS 161 also requires entities to disclose
additional information about the amounts and location of derivatives located
within the financial statements, how the provisions of SFAS 133 have been
applied, and the impact that hedges have on an entity's financial position,
financial performance and cash flows. SFAS 161 is effective for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The Company is currently evaluating the impact that SFAS 161 will
have on its consolidated financial statements.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS
160”).  The standard clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements.  It
requires consolidated net income to be reported at amounts attributable to both
the parent and the noncontrolling interest. It also requires disclosure, on the
face of the consolidated statement of income, amounts of consolidated net income
attributable to the parent and to the noncontrolling interest.  SFAS
160 is effective for the Company for




- 18
-
 annual
periods beginning after December 15, 2008.  Earlier adoption is
prohibited.  The Company is currently evaluating the impact that SFAS
160 will have on its consolidated financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141(R)”).  The fundamental requirements of using
the acquisition method of accounting (which SFAS 141 called the purchase method) for all
business combinations, identifying an acquirer for each business combination,
and identifying and recognizing intangible assets separately from goodwill
remain unchanged by the standard. The new requirements of the standard
include:  recognizing assets acquired, liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date; recognizing the identifiable assets and
liabilities, as well as the noncontrolling interest in the acquiree in a step
acquisition at the full amounts of their fair values; recognizing
acquisition-related and restructuring costs separately from the acquisition
itself; recognizing contingent consideration at the acquisition date, measured
at its fair value on that date; and recognizing a gain by the acquirer when
total acquisition-date fair value of the identifiable net assets acquired
exceeds the fair value of the consideration transferred plus any noncontrolling
interest in the acquiree.  SFAS 141(R) applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008.  SFAS 141(R) is effective for the Company for transactions
consummated during annual periods beginning after December 15,
2008.  Earlier adoption is prohibited.  SFAS 141 (R) also
amends FASB Statement No. 109, Accounting for Income Taxes
(“SFAS 109”), such that the effects of changes to deferred tax asset valuation
allowances established in purchase price allocations are reported directly as a
reduction of income tax expense.  After SFAS 141(R) is adopted, all changes
to tax uncertainties and deferred tax asset valuation allowances established in
purchase accounting, should be recognized in accordance with the amended
requirements of SFAS 109, even if the combination occurred prior to the
effective date of SFAS 141 (R).




In April
2008, the FASB issued FSP No. SFAS 142-3, “Determination of the Useful Life of
Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 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
No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The intent of
FSP SFAS 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 No. 141(R) and other
applicable accounting literature. FSP SFAS 142-3 is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and
must be applied prospectively to intangible assets acquired after the effective
date.







NOTE
12 – INCOME TAXES





The
Company recorded an income tax benefit of $14.5 million and income tax expense
of $1.3 million for its continuing operations for the three months ended
September 30, 2008 and 2007, respectively.  The Company recorded an
income tax benefit of $17.1 million and income tax expense of $7.8 million for
its continuing operations for the nine months ended September 30, 2008 and 2007,
respectively.  Income tax expense is based upon an annual effective
tax rate forecast, including estimates and assumptions that could change during
the year, including the amount of foreign reinvested earnings.





A
discrete tax benefit of $10.1 million was recorded for the three and nine months
ended September 30, 2008 for the reversal of FASB Interpretation No. 48, Accounting for Uncertainties in
Income Taxes (“FIN 48”) reserves, including interest and penalties, for
which the statute of limitations expired during the third quarter.  No
similar benefit was recorded for the three and nine months ended September 30,
2007.  During the nine months ended September 30, 2008, a discrete tax
benefit of $0.6 million was recorded in connection with the completion of an
Internal Revenue Service tax audit.  In addition, during the nine
months ended September 30, 2008, due to the capital gain realized on the sale of
the Company’s Software business unit, a discrete tax benefit of $3.6 million was
recorded for the release of a valuation allowance




-19
-
 maintained
against a capital loss carryforward deferred tax asset.  No similar
benefits were recorded during the nine months ended September 30,
2007.





In
assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible, as well as tax planning
strategies.





Based on
projections of future taxable income over the periods in which the deferred tax
assets are deductible and the history of the Company’s profitability, the
Company believes that it is more likely than not that the benefits of its
deferred tax assets as of September 30, 2008 will be realized.





The
Company adopted FIN 48 effective January 1, 2007. FIN 48 prescribes a new
recognition threshold and measurement attribute for the financial statement
recognition and measurement of an income tax position taken or expected to be
taken in a tax return, as well as providing guidance on the provision of
interest and penalties relating to uncertain tax positions.  The
Company maintained a long-term liability under FIN 48 totaling $57.1 million and
$76.3 million as of December 31, 2007 and September 30, 2008
respectively.  The increase is primarily due to the FIN 48 liability
assumed in the Gemstar acquisition as well as the accrual of interest and
penalties, net of 2008 reversals for statute of limitation
expirations.





The
Company conducts business globally and, as a result, files U.S. federal, state
and foreign income tax returns in various jurisdictions. In the normal course of
business, the Company is subject to examination by taxing authorities throughout
the world, including Japan, the Netherlands, the United Kingdom and the
U.S.  With few exceptions, the Company is no longer subject to income
tax examinations for years before 2003.





NOTE
13 – COMMITMENTS AND CONTINGENCIES





Indemnifications





In the normal course of business, the
Company provides indemnification of varying scopes and amounts to certain of its
licensees against claims made by third parties arising out of the use and/or
incorporation of the Company’s products, intellectual property, services and/or
technologies into the licensee’s products and services, provided the licensee is
not in violation of the terms and conditions of the agreement and/or additional
performance or other requirements for such indemnification. The Company’s
indemnification obligations are typically limited to the cumulative amount paid
to the Company by the licensee under the license agreement, however some license
agreements, including those with our largest multiple system operators (“MSO”)
and digital broadcast satellite (“DBS”) providers, have larger limits or do not
specify a limit on amounts that may be payable under the indemnity
arrangements.  The Company cannot estimate the possible range of
losses that may affect the Company’s results of operations or cash flows in a
given period or the maximum potential impact of these indemnification provisions
on its future results of operations.





In April
2005, Gemstar received a notice of a potential claim for indemnification from
DirecTV Group, Inc. (“DirecTV”) as a result of a lawsuit filed by Finisar
Corporation (“Finisar”) against DirecTV in the United States District Court for
the Eastern District of Texas. Finisar alleged that several aspects of the
DirecTV satellite transmission system, including aspects of its
advanced electronic program guide (“EPG”) and the storage, scheduling, and
transmission of data for the EPG, infringed a Finisar patent. On July 7,
2006, the Court awarded Finisar approximately $117 million. In addition,
the Court ordered DirecTV to pay approximately $1.60 per activated set
top box in licensing fees going forward in lieu of an injunction until the
expiration of Finisar’s patent in 2012.  The parties both filed
appeals to the Federal Circuit, which subsequently ruled that the trial court's
construction of certain terms of the patent was too broad, vacated the jury's
verdict of infringement, held that one of the seven patent claims at issue is
invalid, and left standing the remaining six claims for reconsideration by the
trial court. The appeals court also




- 20
-
 reversed
the jury's finding that DirecTV's infringement was willful.  The
Company has not established a reserve with respect to this matter in its
consolidated financial statements.








Comcast Cable Communications Corp.,
LLC v. Finisar Corporation, in the United States District Court for the
Northern District of California.  In support of a potential claim for
indemnification, Comcast Cable Communications Corp., LLC (“Comcast“) put the
Company on notice that it had received communications from Finisar
Corporation (“Finisar”) asserting infringement of U.S. Patent 5, 404, 505 (the
“‘505 patent”). On July 7, 2006, Comcast filed a declaratory judgment
action in the Northern District of California asking the Court to rule, among
other things, that it does not infringe the ‘505 patent and/or that the patent
is invalid.   On May 15, 2008, Finisar entered into a covenant and
stipulation with Comcast, filed with the California Court, that it would not
assert any claim of the ‘505 patent against Comcast or certain related entities,
other than claim 25.  On July 11, 2008, the Court ruled on Comcast’s
summary judgment motion, finding that claim 25 is invalid, and therefore finding
that Comcast’s non-infringement motion is moot.  Comcast has not taken
any further action insofar as its potential indemnity claim against the Company
is concerned.





Legal Proceedings





We are
involved in legal proceedings related to intellectual property rights and other
matters.  The following legal proceedings include those of Macrovision
Solutions Corporation and its subsidiaries.





Patent and Anti-Trust
Litigation





ODS Technologies, L.P. v. Magna
Entertainment Corp., HRTV, Inc. and XpressBet, Inc., in the United States
District Court for the Central District of California. On May 17, 2007,
Gemstar’s subsidiary ODS Technologies, L.P. (“ODS”, which does business as TVG
Network) filed a patent infringement complaint – and later, an amended
complaint, against Magna Entertainment Corp. (“MEC”), HRTV, LLC (“HRTV”) and
XpressBet, Inc. (“XpressBet”) in the United States District Court for the
Central District of California. ODS asserts that defendants infringe five of its
patents related to interactive off-track wagering systems. ODS seeks injunctive
relief prohibiting further infringement by defendants as well as damages,
including damages attributable to defendants’ allegedly willful infringement. In
response, MEC, XpressBet and HRTV asserted that they do not infringe the subject
patents, that the subject patents are invalid, and that the subject patents are
unenforceable.  On June 25, 2008, MEC and XpressBet filed a motion for
summary judgment asserting that neither of them infringe the asserted claims of
the ‘354 patent.  The hearing date on that motion has been taken off
calendar pending completion of discovery, which is ongoing.





SuperGuide Corporation v. DirecTV
Enterprises, Inc., et al., in the United States District Court for the
Western District of North Carolina. On March 23, 2001, the Company’s
subsidiary, Gemstar Development Corporation (“GDC”), was added as a third-party
defendant in this case.  Plaintiff SuperGuide Corporation’s (“SuperGuide”)
complaint alleged patent infringement by DirectTV, EchoStar, Thomson Consumer
Electronics (“Thomson”), and Hughes Electronics (collectively, the “Defendants”)
with respect to three patents (the “SuperGuide Patents”) owned by SuperGuide but
licensed to GDC.  After being added as a party, GDC brought claims
(i) against SuperGuide for declaratory relief and for breach of contract
relating to a 1993 license agreement between SuperGuide and GDC; and
(ii) against EchoStar for infringing the SuperGuide Patents within GDC’s
defined fields of use. Pursuant to certain licensing and settlement
agreements between GDC and EchoStar, the claims between GDC and EchoStar were
dismissed with prejudice. During March 2007, the Court held a bench trial on the
licensing issues in the case. On July 20, 2007, the Court ruled in favor of
SuperGuide on those issues. In connection with that ruling, GDC’s counterclaims
against SuperGuide for declaratory judgment and breach of contract were
dismissed with prejudice.




- 21
-


DirecTV
has asserted purported indemnification rights with respect to the SuperGuide litigation. On
September 11, 2007, the Company received notice from DirecTV asserting a
potential right to defense and indemnification. On September 19, 2007, the
Company denied DirecTV’s asserted claims for indemnity. On April 4, 2008,
DirecTV again asserted that the Company is responsible for indemnification of
DirecTV’s costs, fees, liabilities, and expenses associated with the SuperGuide litigation. The
Company responded to DirecTV on April 11, 2008, again denying DirecTV’s renewed
assertion of a right to indemnity.  On June 30, 2008, DirecTV again
wrote to the Company asserting its alleged right to indemnity, and providing
arguments in rebuttal to the Company’s denial.





With
respect to the SuperGuide litigation, in
October 2008, we learned that SuperGuide, DirecTV and Thomson filed a motion for
dismissal.  Both DirecTV and Thomson have approached us with a request
that we contribute to the settlement amount(s), but we have not agreed to such
requests.





On
January 23, 2008, Sharp Corporation filed an antitrust complaint with the
European Competition Commission (the “Commission”), requesting that it
investigate alleged antitrust violations by the Company. The complaint alleges
that the Company has exploited its market power and position in the IPG
technology market to exclude competition and harm consumers.   On
March 26, 2008 the Company submitted a response to Sharp’s antitrust complaint,
arguing that Sharp’s allegations are without merit, and do not warrant
investigation by the Commission.    In or about October
2008, Sharp withdrew its support for the complaint, and we were subsequently
advised by the Commission that the matter will be closed.





Gemstar Acquisition
Litigation





Martin Henkel v. Battista, et
al., in the Court of Chancery of the State of Delaware. On
December 17, 2007, a purported stockholder class action lawsuit was filed
against Gemstar and members of its Board of Directors alleging that the
then-pending  acquisition of Gemstar was unfair to its stockholders.
The complaint contained a cause of action for breach of fiduciary duty against
Gemstar and members of its Board of Directors. On February 1, 2008, the
plaintiff filed an amended complaint, adding News Corporation as a defendant and
asserting a cause of action against News Corporation for aiding and abetting
breach of fiduciary duty. On March 14, 2008, the parties executed a Memorandum
of Understanding, agreeing to a full settlement of the matter in exchange for
certain supplemental public disclosures related to the proposed acquisition and
attorney fees not to exceed $1.25 million. The court has approved the
settlement.  The settlement documents are expected to be finalized in
the near future, and the class members will receive notification of the
settlement.





Other
Litigation





Thomson, Inc. v. Gemstar – TV Guide
International, Inc., in the Superior Court of the State of Indiana for
the County of Hamiltonand Thomson, Inc. v. Gemstar Development
Corporation, in the United States District Court for the Southern
District of Indiana. On May 23, 2008, Thomson, Inc. (“Thomson”) filed a lawsuit
against Gemstar Development Corporation in an Indiana Federal Court, and against
Gemstar – TV Guide International, Inc., in an Indiana State Court, seeking,
among other things, indemnification from the Company in connection with the
SuperGuide Corp v. DirecTV
Enterprises, Inc. et. al matter discussed above.  In both
complaints, Thomson alleged that it entered into multiple agreements with the
Company between 1996 and 2003 that would require the Company to indemnify
Thomson in the SuperGuide
litigation.  Specifically, Thomson asserts causes of action for
fraud/fraudulent inducement, breach of contract, breach of implied in fact
indemnity and warranty of title against infringement, and unjust
enrichment.  The lawsuits seek a declaration from the Court that the
Company owes Thomson defense and indemnity for claims regarding the patents at
issue in the SuperGuide
matter, compensatory damages, including fees and expenses paid by Thomson in
connection with the SuperGuide matter, the return
of royalties paid by Thomson to the Company under the aforementioned agreements,
pre and post-judgment interest, punitive damages, attorney fees, and costs of
suit.  On July 1, 2008 Thomson dismissed the federal case and filed an
amended complaint in the state court case, adding Gemstar – TV Guide
International, Inc.




- 22
-
 as a
party to that action.  The Company’s response to Thomson’s amended
complaint was filed on July 21, 2008. Thomson had made previous demands for
indemnity in connection with the SuperGuide litigation in 2000
and 2007, which were denied by the Company, and in May 2001, the parties had
entered into an agreement to toll the statute of limitations with respect to
certain related issues.





In
addition to the items listed above, Macrovision Solutions Corporation is party
to various legal actions, claims and proceedings as well as other actions,
claims and proceedings incidental to its business. Macrovision Solutions
Corporation has established loss provisions only for matters in which losses are
probable and can be reasonably estimated. Some of the matters pending against
Macrovision Solutions Corporation involve potential compensatory, punitive or
treble damage claims, or sanctions, that if granted, could require them to pay
damages or make other expenditures in amounts that could have a material adverse
effect on their financial position or results of operations. At this time
management has not reached a determination that any of the matters listed above
or Macrovision Solutions’ other litigation are expected to result in liabilities
that will have a material adverse effect on our financial position or results of
operations or cash flows.





NOTE
14 – SUBSEQUENT EVENTS





On October 10, 2008, the Company
and an affiliate entered into a definitive asset purchase agreement with an
affiliated company of OpenGate Capital, LLC (Buyer), for Buyer to purchase the
assets of the TV Guide Magazine business. In connection with the transaction,
Buyer will assume certain liabilities of the TV Guide Magazine business, and the
Company or its designated affiliate will loan Buyer an amount not to exceed $9.5
million under certain terms and conditions. The transaction is subject to
customary conditions to closing and is expected to close on or about
December 1, 2008.






- 23
-


Item 2.   Management’s Discussion and Analysis of
Financial Condition and Results of Operations





The
following commentary should be read in conjunction with the financial statements
and related notes contained in our Annual Report on Form 10-K/A for the year
ended December 31, 2007 as filed with the SEC.





Overview




On
December 6, 2007, Macrovision Corporation and Gemstar-TV Guide International,
Inc. (“Gemstar”) entered into an agreement for Macrovision Corporation to
acquire Gemstar in a cash and stock transaction.  Upon consummation of
this transaction on May 2, 2008, Macrovision Solutions Corporation, a Delaware
corporation founded in 2007, assumed ownership of both Gemstar and Macrovision
Corporation.  The common stock of Macrovision Corporation and Gemstar
were de-registered and Macrovision Corporation stockholders were provided one
share in Macrovision Solutions Corporation for each share of Macrovision
Corporation common stock owned as of the closing.  Macrovision
Corporation is the predecessor registrant to Macrovision Solutions Corporation
and therefore, for periods prior to May 2, 2008, the consolidated financial
statements reflect the financial position and results of operations and cash
flows of Macrovision Corporation.  The Company’s results of operations
include the operations of Gemstar from May 2, 2008, forward.





Gemstar
was a technology, media and entertainment company that developed, licensed,
marketed and distributed products and services targeted at the video guidance
and entertainment needs of consumers worldwide.  The Company acquired
Gemstar to increase its product offerings and believes the combined Company’s
complementary solutions will lead to increased market opportunity and an
expanded customer base.





On April
1, 2008, the Company closed the sale of its software and games businesses
(hereafter referred to as “Software” and “Games”, respectively). In the second
quarter of 2008, the Company determined it was probable that it would divest its
TV Guide Magazine and RightCommerce (also known as “eMeta”)
businesses.  Additionally in the third quarter of 2008, the Company
determined it was probable it would divest its TV Guide Network and TVG Network
businesses.  The results of operations and cash flows of Software,
Games, TV Guide Magazine TV Guide Network, TVG Network and eMeta have been
classified as discontinued operations, for all periods presented (See Note
3 to the financial statements).




The
Company’s continuing operations provide a broad set of solutions that enable
businesses to protect, enable and distribute their digital goods to consumers
and allows consumers the ability to discover and manage digital media across
multiple channels.  With the Gemstar acquisition, our offerings now
include interactive program guides (“IPGs”). In addition to offering Company
developed IPGs, our customers may also license our patents and deploy their own
IPG or a third party IPG.   We group our revenue  into
the following categories – (i) consumer electronics (“CE”) manufacturers, (ii)
service providers (cable, satellite, telecommunications, mobile and internet
service providers among others), and (iii) other.   CE
manufacturers deploy such Company products and services as Media Player
Software, Media Server Software, Source Code SDK, Software Update Service, TV
Guide On Screen, Guide Plus+, G-GUIDE, VCR Plus+, My TV Guide, G-Code, ShowView
System, LASSO and Tapestry.  Service providers deploy such Company
products and service as Passport Echo, Passport DCT, Passport, Passport
Applications, i-Guide, j-Guide, My TV Guide, TV Guide Mobile and G-Guide
Mobile.  Other includes our entertainment company content protection
products and services such as ACP, RipGuard and BD+; our TV Guide and AMG
related web sites; and our business of licensing our extensive database of
descriptive information about television, movie, music and game
content.




- 24
-


Results
of Operations








The
following tables present our condensed consolidated statements of income for our
continuing operations compared to the prior year periods (in
thousands).




Three
      Months EndedSeptember
      30,2008
              
              
              2007
              
              
              Change
      $
              
              
              Change
      %Revenues:CE
      manufacturers
              $        50,549
              
              
              $        33,352
              
              
              17,197
              
              
              52%Service
      providers
              46,013
              
              
              1,615
              
              
              44,398
              
              
              2749%Other
              15,638
              
              
              10,638
              
              
              5,000
              
              
              47%Total
      revenues
              112,200
              
              
              45,605
              
              
              66,595
              
              
              146%Costs
      and expenses:Cost
      of revenues
              16,347
              
              
              1,694
              
              
              14,653
              
              
              865%Research
      and development
              22,314
              
              
              3,292
              
              
              19,022
              
              
              578%Selling
      and marketing
              19,920
              
              
              4,716
              
              
              15,204
              
              
              322%General
      and administrative
              18,092
              
              
              8,657
              
              
              9,435
              
              
              109%Depreciation
              5,281
              
              
              1,256
              
              
              4,025
              
              
              320%Amortization
              21,020
              
              
              1,382
              
              
              19,638
              
              
              1421%Restructuring
      and asset impairment charges
              -
              
              
              163
              
              
              (163
              )
              
              -100%Total
      operating expenses
              102,974
              
              
              21,160
              
              
              81,814
              
              
              387%Operating
      income from continuing operations
              9,226
              
              
              24,445
              
              
              (15,219
              )
              
              -62%Interest
      expense
              (16,124
              )
              
              (1,969
              )
              
              (14,155
              )
              
              719%Interest
      income and other, net
              2,397
              
              
              6,859
              
              
              (4,462
              )
              
              -65%(Loss)
      Income from continuing operations before taxes
              (4,501
              )
              
              29,335
              
              
              (33,836
              )
              
              -115%Income
      tax (benefit) expense
              (14,453
              )
              
              1,316
              
              
              (15,769
              )
              
              -1198%Income
      from continuing operations, net of tax
              9,952
              
              
              28,019
              
              
              (18,067
              )
              
              -64%Loss
      from discontinued operations, net of tax
              (1,162
              )
              
              (13,927
              )
              
              12,765
              
              
              -92%Net
      income
              $          8,790
              
              
              $        14,092
              
              
              (5,302
              )
              
              -38%






- 25
-


Nine
      Months EndedSeptember
      30,2008
              
              
              2007
              
              
              Change
      $
              
              Change
      %Revenues:CE manufacturers
              $     101,317
              
              
              $        67,251
              
              
              34,066
              
              51%Service providers
              75,447
              
              
              3,023
              
              
              72,424
              
              2396%Other
              41,445
              
              
              32,805
              
              
              8,640
              
              26%Total revenues
              218,209
              
              
              103,079
              
              
              115,130
              
              112%Costs
      and expenses:Cost of revenues
              33,761
              
              
              7,177
              
              
              26,584
              
              370%Research and development
              45,172
              
              
              9,805
              
              
              35,367
              
              361%Selling and marketing
              43,777
              
              
              18,456
              
              
              25,321
              
              137%General and administrative
              41,297
              
              
              22,501
              
              
              18,796
              
              84%Depreciation
              10,215
              
              
              4,014
              
              
              6,201
              
              154%Amortization
              39,382
              
              
              4,077
              
              
              35,305
              
              866%Restructuring and asset impairment charges
              -
              
              
              3,244
              
              
              (3,244)
              
              -100%Total operating expenses
              213,604
              
              
              69,274
              
              
              144,330
              
              208%Operating
      income from continuing operations
              4,605
              
              
              33,805
              
              
              (29,200)
              
              -86%Interest
      expense
              (29,417
              )
              
              (5,798
              )
              
              (23,619)
              
              407%Interest
      income and other, net
              10,496
              
              
              16,903
              
              
              (6,407)
              
              -38%Gain
      on strategic investments
              5,238
              
              
              -
              
              
              5,238
              
              NA(Loss)
      income from continuing operations before taxes
              (9,078
              )
              
              44,910
              
              
              (53,988)
              
              -120%Income
      tax (benefit) expense
              (17,140
              )
              
              7,786
              
              
              (24,926)
              
              -320%Income
      from continuing operations, net of tax
              8,062
              
              
              37,124
              
              
              (29,062)
              
              -78%Income
      (loss) from discontinued operations, net of tax
              92,964
              
              
              (14,832
              )
              
              107,796
              
              -727%Net
      income
              $     101,026
              
              
              $        22,292
              
              
              78,734
              
              353%






Net
Revenue





CE Manufacturers





For the
three and nine months ended September 30, 2008, revenue from the sale of our
products and licensing of our patents to CE manufacturers increased
significantly compared to the same periods in the prior year. This was largely
due to including revenue from products and services the Company obtained in the
Gemstar acquisition.  Legacy Gemstar IPG products and patents
contributed $24.9 million and $37.2 million in revenues to the three and nine
month periods, respectively.  As the Gemstar acquisition closed on May
2, 2008, the nine month period ended September 30, 2008, includes five months of
Gemstar revenue.  We expect revenue from the licensing of our IPG
products and patents to grow in the future primarily driven by new license
agreements and increased sales of CE devices incorporating our products or
patents.  We anticipate that this revenue growth will largely come
from Japan and Europe.  Legacy Gemstar VCR Plus+ related products
contributed $5.2 million and $8.9 million in revenues to the three and nine
month periods, respectively.  We expect revenue from our VCR Plus+
products to decline in the future as manufacturers and consumers demand the
greater guidance provided by IPG related products.  For the three and
nine months ended September 30, 2008, legacy Macrovision revenue decreased by
$13.4 million and $12.5 million, respectively, as compared to the same periods
in the prior year.  These decreases were primarily due to the third
quarter of 2007 including a significant set-top box licensing
transaction.  We anticipate ACP licensing revenues and royalties will
grow as more digital set-top boxes are deployed in Europe and North
America.





- 26
-


Service
Providers





For the
three and nine months ended September 30, 2008, revenue from the sale of our
products to service providers increased significantly compared to the same
periods in the prior year.  This was largely due to including revenue
from products and services the Company obtained in the Gemstar
acquisition.  Legacy Gemstar products and services contributed $45.2
million and $71.8 million in revenues to the three and nine month periods,
respectively, primarily from the licensing of our IPG products and patents. We
expect revenue from the licensing of our IPG products and patents to grow in the
future as we continue to expand our licensing program
internationally.





Other





Other
consists primarily of the licensing of our content protection technologies to
entertainment companies, the licensing of our underlying media content/metadata
and the operation of TV Guide Online.  For the three and nine months
ended September 30, 2008, other increased compared to the same periods in the
prior year primarily due to the Gemstar and the All Media Guide Holding, Inc.
(“AMG”) acquisitions.  The AMG acquisition occurred in December
2007.  The data and on-line businesses acquired from Gemstar and AMG
contributed revenues of $8.1 million and $19.0 million for the three and nine
months ended September 30, 2008, respectively.  These increases were
partially offset by a decrease in legacy Macrovision ACP and RipGuard revenue
from entertainment companies of $4.5 million and $11.4 million for the three and
nine months ended September 30, 2008, respectively, primarily due to price
declines in new agreements and the loss of a major studio in the second quarter
of 2007.





Cost of
Revenues.





For the
three and nine months ended September 30, 2008, cost of revenues increased from
the same periods in the prior year, primarily due to additional costs associated
with products and services acquired in the Gemstar acquisition.  Also
contributing to the increase are costs associated with AMG, which was acquired
in December 2007.





Research
and Development.





For the
three and nine months ended September 30, 2008, research and development
expenses increased from the same periods in the prior year primarily due to
additional costs related to the Gemstar operations as well as AMG and SPDC
research and development activities.





Selling
and Marketing.





For the
three and nine months ended September 30, 2008, selling and marketing expenses
increased from the same periods in the prior year, primarily due to additional
costs associated with the Gemstar operations.  Legacy Macrovision CE
products sales and marketing costs also increased as compared to the same
periods in the prior year.





General and
Administrative.





General
and administrative expenses increased from the same periods in the prior year,
due to additional costs associated with the Gemstar operations.  Also
contributing to the increase in general and administrative costs were costs
associated with the integration of Gemstar and an increase in stock compensation
expense.




- 27
-


Depreciation
and amortization





Depreciation
and amortization increased from the same periods in the prior year due to the
depreciation and amortization of intangible assets from the acquisitions of
Gemstar, AMG and SPDC technology.





Restructuring and asset impairment
charges.





During
the nine months ended September 30, 2007, the Company recorded $3.2 million in
restructuring charges, consisting of severance benefits of $2.3 million, service
contract cancellations and asset losses of $0.5 million and abandonment of
leased facilities of $0.4 million.





Interest
Expense.





Interest
expense increased compared to the same periods in the prior year due to the
issuance of $550 million of bank debt and $100 million of senior notes to
finance the Gemstar acquisition.





Interest Income and Other,
Net.





Interest
income and other, net decreased from the same periods in the prior year due to
lower prevailing interest rates and lower average cash and investment
balances.





Gain on strategic
investments.





During
the first quarter of 2008, we sold our investment in Digimarc and realized a
gain of $5.2 million.





Income Taxes.





We
recorded an income tax benefit from continuing operations of $14.5 million and
income tax expense of $1.3 million for the third quarters of 2008 and 2007,
respectively.  We recorded an income tax benefit from continuing
operations of $17.1 million and income tax expense of $7.8 million for the nine
months ended September 30, 2008 and 2007, respectively.   During
the third quarter of 2008, a discrete tax benefit of $10.1 million was recorded
for the reversal of FIN 48 reserves for which the statute of limitations expired
during the quarter.   In addition, during the nine months ended
September 30, 2008, discrete tax benefits of $3.6 million and $0.6 million were
recorded for the release of a deferred tax asset valuation allowance and a
carryback claim resulting from completion of an Internal Revenue Service
examination, respectively.  No similar benefits were recorded during
the nine months ended September 30, 2007.  The amounts recorded as
income tax expense and benefit are also impacted by the change in the proportion
of profit generated by certain foreign operations which the Company plans to
reinvest indefinitely and for which no US tax is provided.





Seasonality
of Business





We have
experienced seasonality in our business, and our consolidated financial
condition and results of operations are likely to be affected by seasonality in
the future.  Sales of our content protection products to CE and
entertainment customers typically are highest in the fourth quarter of each
calendar year.  We believe this trend has been principally due to the
tendency of certain of our customers to manufacture and release new video titles
and to sell more CE devices during the year-end holiday shopping
season.  Our CE IPG licensing business experiences fluctuations due to
the seasonality of consumer electronics product shipments, which tend to be
highest in the fourth calendar quarter.  We recognize revenue
associated with these consumer electronic products when shipments are reported
to us, which is




- 28
-
 normally
the quarter immediately following that of actual shipment by the
licensee.  Historically, our operating expenses have occurred more
evenly throughout the year.





Costs
and Expenses





Our cost
of revenues consists primarily of service costs, replicator fees and patent
prosecution, patent maintenance and patent litigation costs.  Our
research and development expenses are comprised primarily of employee
compensation and benefits, tooling and supplies, our 49% share of the Guideworks
LLC joint venture and an allocation of overhead and facilities
costs.  We account for our 49% share of Guideworks as an operating
expense in accordance with SFAS No. 68, Research and Development
Arrangements.Our selling and marketing expenses are comprised
primarily of employee compensation and benefits, travel, advertising and an
allocation of overhead and facilities costs.  Our general and
administrative expenses are comprised primarily of employee compensation and
benefits, travel, accounting, tax and corporate legal fees and an allocation of
overhead and facilities costs.  Included in expenses for the three and
nine months ended September 30, 2008, were $3.2 million and
$6.2  million, respectively, in costs related to the transition and
integration of legacy Gemstar businesses, products and employees.





Critical
Accounting Policies and Use of Estimates





The
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements.  These condensed
consolidated financial statements have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission.  The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and
liabilities.  On an on-going basis, we evaluate our estimates,
including those related to revenue recognition, allowance for doubtful accounts,
equity-based compensation, valuation of strategic investments, goodwill and
intangible assets, impairment of long lived assets and income
taxes.  Our estimates are based on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances.  Actual results may differ from these
estimates.





Other
than the critical accounting policy described below, there have been no
significant changes in our critical accounting policies during the nine months
ended September 30, 2008, as compared to those disclosed in our Annual Report on
Form 10-K/A for the year ended December 31, 2007.







Classification
      and Fair Value Measurement of Auction Rate
    Securities





We hold
investments in auction rate securities having contractual maturities of greater
than one year and interest rate reset features of between 7 and 35
days.  These auction rate securities were priced and subsequently
traded as short-term investments because of the interest rate reset feature.
Consequently, we have historically classified our auction rate securities as
available for sale short-term investments at par.





As a
result of recent adverse conditions in the financial markets, the auction rate
securities we hold have failed to trade at recent auctions due to insufficient
bids from buyers.  We have therefore had to hold these securities
beyond their scheduled auction reset dates.  The short-term liquidity
of these securities is currently uncertain. As it is not possible to predict
when auctions for the securities we hold will succeed in the future and because
we have the ability and intent to hold these investments until the market
recovers, we have reclassified our auction rate securities to long-term
marketable securities in our Condensed Consolidated Balance Sheet as of
September 30, 2008.





Additionally,
because of recent interest rate reset auction failures, the fair values of these
securities are estimated utilizing a discounted cash flow analysis or other type
of valuation model as of September 30, 2008 rather than at par. These analyses
are highly judgmental and consider, among other items, the




- 29
-
 likelihood
of redemption, credit quality, duration, insurance wraps and expected future
cash flows.  These securities were also compared, when possible, to
other observable market data with similar characteristics to the securities held
by us.





Temporary
declines in fair value for our auction rate securities, which we attribute to
market liquidity issues rather than credit issues, are recorded in accumulated
other comprehensive income. Any future fluctuation in fair value related to
these instruments that we deem to be temporary, including any recoveries of
previous write−downs, would be recorded to accumulated other comprehensive
income. If we determine that any future valuation adjustment is other than
temporary, we will record a charge to earnings as appropriate.





Liquidity
and Capital Resources





We have
financed our operations primarily from cash generated by operations, principally
our CE and service provider market verticals.  Our operating
activities from continuing operations provided net cash of $18.4 million and
$41.6 million in the nine months ended September 30, 2008 and 2007,
respectively.  Cash provided by operating activities decreased $23.2
million from the prior period primarily due to the timing of payment of
liabilities and the payment of $16.5 million in severance in connection with the
Gemstar acquisition (see Note 8 to the condensed consolidated financial
statements).  The availability of cash generated by our operations in
the future could be affected by other business risks including, but not limited
to, those factors set forth under the caption “Risk Factors” contained in Item
1A of our Quarterly Report on Form 10-Q for the period ended March 31,
2008.





Net cash
used in investing activities from continuing operations increased $484.5 million
from the prior period, primarily due to the Gemstar acquisition partially offset
by the proceeds from the sale of Software and Games and the conversion of
marketable securities to cash and cash equivalents.





Net cash
provided by financing activities from continuing operations increased $615.6
million from the prior year period primarily due to the issuance of $650 million
in debt to fund the Gemstar acquisition, partially offset by debt issuance costs
of $34.5 million and a $48.0 million decrease in proceeds from exercise of
options and stock issued under the employee stock purchase plan.





In
September 2007, the Board of Directors of Macrovision Corporation authorized a
stock repurchase program, which allows the Company to purchase up to $60.0
million of the Company’s common stock in the open market from time to time at
prevailing market prices or otherwise, as conditions warrant.  On May
5, 2008, the Board of Directors of Macrovision Solutions Corporation reconfirmed
this stock purchase program.  As of September 30, 2008, no shares of
common stock have been repurchased under this program.





As of
September 30, 2008, we had $268.7 million in cash and cash equivalents, $21.5
million in short-term investments, and $78.7 million in long-term
marketable securities.  We anticipate that capital expenditures to
support the growth of our business and strengthen our operations infrastructure
will not exceed $5 million for the remainder of the year.  We also
have future minimum lease payments of approximately $111.6 million under
operating and capital leases.  These future minimum lease payments are
payable as follows: remainder of 2008 - $5.8 million, 2009 - $19.9 million, 2010
- $16.5 million, 2011 – $13.3 million, 2012 – $10.6 million and $45.5 million
thereafter.





In
connection with the Gemstar acquisition Macrovision Solutions Corporation and
Macrovision Corporation, as co-obligors, entered into a $550 million five year
senior secured term loan credit facility and issued $100 million aggregate
principal amount of 11% senior notes due 2013.  The senior term loan
credit facility bears interest at libor plus 3.75%, with a libor floor of
3.5%.  Interest is payable on the senior secured term loan credit
facility quarterly in arrears and on the 11% notes semiannually in arrears on
November 15 and May 15.  The senior secured credit facility includes
customary covenants, including Total




- 30
-
 Leverage
Ratio limits, Fixed Charge Coverage minimums and restrictions on additional debt
incurrance and dividend payments among others.  As of September 30,
2008 the Company was in compliance with the senior secured credit facility debt
covenants.  In addition, Macrovision Corporation has $240.0 million of
2.625% convertible senior notes due 2011.  The 2.625% senior
convertible notes pay interest semiannually in arrears on February 15 and August
15 of each year.





In the
event (i) the company’s leverage ratio is greater than 2.5 to 1.0, and (ii) more
than $50 million in aggregate principal amount of the 2.625% convertible senior
notes due 2011 is still outstanding, and (iii) the scheduled maturity of the
2.625% convertible senior notes due 2011 is more than 181 days in the future,
then the term loans under our senior secured credit facility will become due on
that 182nd day prior to the 2.625% convertible senior notes maturity
date.  The Company may redeem some or all of the 11% senior notes due
2013 at any time on or after November 15, 2009 at a price equal to 100% of the
principal amount of notes to be redeemed. In addition, the Company may redeem
these notes, in whole or in part, at any time before November 15, 2009 at a
redemption price plus a “make-whole” premium. The Company must offer to purchase
the notes if it experiences specific kinds of changes of control or sells assets
under certain circumstances.





We are
currently exploring strategic alternatives for the TV Guide Network and TVG
Network businesses, and in October 2008, we entered into a definitive agreement
to sell the assets of the TV Guide magazine business.  In connection
with the TV Guide Magazine transaction, the buyer will assume certain
liabilities of the TV Guide Magazine business and we will loan the buyer an
amount not to exceed $9.5 million under certain terms and conditions.  We
expect to pay down our debt with proceeds from any divestitures that may result
from these processes.





As of
September 30, 2008, we held auction rate securities with a fair value of $72.6
million and par value of $79.4 million.  Our auction rate securities
portfolio includes solely AAA rated investments, comprised of federally insured
student loans and municipal and educational authority bonds. However, the
auction rate securities we hold have failed to trade at recent auctions due to
insufficient bids from buyers. This limits the short-term liquidity of these
instruments and may limit our ability to liquidate and fully recover the
carrying value of our auction rate securities if we needed to convert some or
all to cash in the near term.  These developments may result in an
impairment charge to earnings if future auctions fail and credit ratings
deteriorate as a result.  We believe that based upon our current other
cash and cash equivalent balances, the current lack of liquidity in the auction
rate securities market will not have a material impact on our liquidity or our
ability to fund our operations.





Included
in the above are $59.6 million of auction rate securities acquired through UBS
AG.  Due to the failure of the auction rate market in early 2008, UBS
and other major banks entered into discussions with governmental agencies to
provide liquidity to owners of auction rate securities.  As a result
of UBS AG’s settlement with the governmental agencies, in October 2008 we
received an Auction Rate Securities Rights Offering from UBS AG under which, if
entered into, we would be provided the right to sell the auction rate securities
acquired through UBS AG at par value at any time between June 30, 2010 and July
1, 2012.





We
believe that cash flows generated from operations will be sufficient to meet our
working capital, capital expenditure and debt requirements for the foreseeable
future.





Discontinued
Operations





The
collective results from all discontinued operations were as follows (in
thousands):




- 31
-




Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Net
      revenue:Software
              $           -
              
              
              $     26,488
              
              
              $    27,503
              
              
              $      81,220Games
              -
              
              
              1,787
              
              
              1,633
              
              
              7,360eMeta
              1,712
              
              
              2,891
              
              
              5,624
              
              
              7,380TV
      Guide Magazine
              30,859
              
              
              -
              
              
              50,636
              
              
              -Media
      Networks:TV
      Guide Network
              29,387
              
              
              -
              
              
              48,390
              
              
              -TVG
      Network
              15,584
              
              
              -
              
              
              24,418
              
              
              -Pre-tax
      (loss) incomeSoftware
              $       (322
              )
              
              $       2,705
              
              
              $     (7,187
              )
              
              $      11,312Games
              -
              
              
              (12,808
              )
              
              (2,551
              )
              
              (24,208
              )eMeta
              (7,487
              )
              
              (399
              )
              
              (11,032
              )
              
              (3,042
              )TV
      Guide Magazine
              (4,851
              )
              
              -
              
              
              (6,522
              )
              
              -Media
      Networks
              8,092
              
              
              -
              
              
              10,869
              
              
              -Pre-tax
      gain on disposal of software and games
              -
              
              
              -
              
              
              151,284
              
              
              -Income
      tax (expense) benefit
              3,406
              
              
              (3,425
              )
              
              (41,897
              )
              
              1,106Income
      (loss) from discontinued operations, net of tax
              $    (1,162
              )
              
              $    (13,927
              )
              
              $    92,964
              
              
              $     (14,832
              )






Our Software
business focused on independent software vendors and enterprise IT departments
with solutions including: the FLEXnet suite of electronic license management,
electronic license delivery and software asset management products;
InstallShield and other installer products; and AdminStudio software packaging
tools.  Our Games business focused on providing tools and services
needed to facilitate the digital distribution of providers of digital
goods.  The sale of our Software and Games businesses closed on April
1, 2008.





An
arbitration hearing on an action filed by a customer against Macrovision
Corporation seeking indemnity for third-party claims of intellectual property
infringement was completed on April 16, 2008. The arbitrator subsequently ruled
in favor of the customer, awarding it $6 million for the indemnity plus accrued
interest (totaling approximately $1 million), and reasonable attorneys’ fees and
costs in an amount subject to proof and determination by the arbitrator. 
This indemnification award has been included above in the pre-tax loss of the
Software business for the nine months ended September 30, 2008.





TV Guide
magazine’s weekly content is centered on TV-related news, feature stories, TV
celebrity photos, behind-the-scenes coverage, reviews and recommendations and
national television listings.  The magazine is published as one
national edition, with either an Eastern/Central or a Mountain/Pacific time-zone
listings.  TV Guide magazine’s rate base, the volume of circulation
guaranteed to advertisers, is currently 3.2 million.





TV Guide
Network generates revenue primarily from advertising and carriage
fees.  While the TV Guide Network has seen an increase in its CPMs,
the rate at which it sells conventional television advertising, it has been
challenged by a weak infomercial market and declining ratings as analog
households, which historically have been the source of most of the Network’s
viewership, are a declining portion of the Network’s distribution due to
continued digital migration.





TVG
Network generates revenue primarily from wagering and licensing
fees.





eMeta provides software solutions that
enable companies to manage and sell digital goods and services
online.  Based on the non-binding offers the Company received in the
third quarter of 2008 to acquire the eMeta business, it became apparent the
Company needed to reassess its outlook for this business.  The Company
conducted an analysis to estimate the fair value of eMeta’s goodwill and
intangible assets.  As a




- 32
-


result,
the Company recorded impairment charges totaling $5.3 million for goodwill and
$1.4 million for the intangible assets of eMeta.  These impairment
charges are included in the above pre-tax loss of the eMeta business for the
three and nine months ended September 30, 2008.








Impact
of Recently Issued Accounting Standards





See Notes
4 and 11 to the consolidated financial statements for a full description of
recent accounting pronouncements, including the anticipated dates of adoption
and the effects on our consolidated financial statements.





Item
3.  Quantitative and Qualitative
Disclosures about Market Risk





We are
exposed to financial market risks, including changes in interest rates, foreign
currency exchange rates and security investments.  Changes in these
factors may cause fluctuations in our earnings and cash flows.  We
evaluate and manage the exposure to these market risks as follows:





Fixed Income
Investments:  We have an investment portfolio of money market
funds and fixed income securities, including those classified as cash
equivalents, short-term investments and long-term marketable investment
securities of $336.8 million as of September 30, 2008.  Most of these
securities are subject to interest rate fluctuations.  An increase in
interest rates could adversely affect the market value of our fixed income
securities while a decrease in interest rates could adversely affect the amount
of interest income we receive.





Our investment portfolio consists
principally of investment grade municipal bonds, money market mutual funds,
U.S. Treasury and agency securities, corporate bonds, commercial paper and
auction rate securities. We regularly monitor the credit risk in our investment
portfolio and take appropriate measures to manage such risks prudently in
accordance with our investment policies.





As a
result of recent adverse conditions in the financial markets, auction rate
securities may present risks arising from liquidity and/or credit concerns. At
September 30, 2008, the fair value of our auction rate securities portfolio
totaled approximately $72.6 million. Our auction rate securities portfolio
includes solely AAA rated investments, comprised of federally insured student
loans and municipal and educational authority bonds. However, the auction rate
securities we hold have failed to trade at recent auctions due to insufficient
bids from buyers.  If there are future unsuccessful auctions, it may
result in us having to hold these securities beyond their scheduled auction
reset dates, limiting the short-term liquidity of these securities. In addition,
the credit ratings of these investments may deteriorate and as a result the fair
value of these auction rate securities may decline and we may incur impairment
charges in connection with these securities which would adversely impact our
earnings and financial condition.





We do not
use derivative financial instruments in our investment portfolio to manage
interest rate risk.  We limit our exposure to interest rate and credit
risk, however, by establishing and strictly monitoring clear policies and
guidelines for our fixed income portfolios.  The primary objective of
these policies is to preserve principal while at the same time maximizing
yields, without significantly increasing risk.  A hypothetical 50
basis point increase in interest rates would result in a $0.1 million decrease
in the fair value of our fixed income available-for-sale securities as of
September 30, 2008.





While we
cannot predict future market conditions or market liquidity, we believe that our
investment policies provide an appropriate means to manage the risks in our
investment portfolio.





Foreign Currency Exchange
Rates.  Due to our reliance on international and export sales,
we are subject to the risks of fluctuations in currency exchange
rates.  Because a substantial majority of our international and export
revenues, as well as expenses, are typically denominated in U.S.
dollars,




- 33
-
 fluctuations
in currency exchange rates could cause our products to become relatively more
expensive to customers in a particular country, leading to a reduction in sales
or profitability in that country.  Many of our subsidiaries operate in
their local currency, which mitigates a portion of the exposure related to the
respective currency collected.





2.625% Convertible senior notes due
2011.On August 23, 2006, Macrovision Corporation completed a
private offering of $240.0 million of 2.625% convertible senior notes due
2011.  Subject to fulfillment of certain conditions, these notes were
initially convertible at a rate of 35.3571 shares of Macrovision Corporations
common stock per $1,000 principal amount of notes (equivalent to a conversion
price of approximately $28.28 per share of Macrovision common stock). In
connection with the May 2, 2008 acquisition of Gemstar, Macrovision Solutions
Corporation assumed ownership of Macrovision Corporation.  Macrovision
Solutions Corporation, Macrovision Corporation and the Bank of New York, as
Trustee for the convertible note holders, executed a Supplemental Indenture
under which the notes become convertible into a number of shares of Macrovision
Solutions Corporation common stock to be determined in accordance with the
Convertible Debt Indenture dated August 23, 2006.  The conversion rate
is subject to adjustment if certain events occur. These notes bear interest at a
rate of 2.625% per year. Interest on the notes have accrued from August 23,
2006. Interest is payable semiannually in arrears on February 15 and August 15
of each year.





Senior Credit
Facility.On May 2, 2008, in connection with its acquisition
of Gemstar, Macrovision Solutions Corporation and Macrovision Corporation, as
co-obligors, entered into a secured credit facility that is a five-year term
loan facility of up to $550.0 million. In the event (i) the company’s leverage
ratio is greater than 2.5 to 1.0, (ii) more than $50 million in aggregate
principal amount of the 2.625% convertible senior notes due 2011 is still
outstanding, and (iii) the scheduled maturity of the 2.625% convertible senior
notes due 2011 is more than 181 days in the future, then the term loans under
our senior secured credit facility will become due on that 182nd day prior to
the 2.625% convertible senior notes maturity date.





11% Senior Notes due
2013.On May 2, 2008, in connection with its acquisition of
Gemstar, Macrovision Solutions Corporation and Macrovision Corporation, as
co-obligors, issued $100,000,000 aggregate principal amount of 11% senior notes
due 2013.   We may redeem some or all of the notes at any time on
or after November 15, 2009 at a price equal to 100% of principal amount of notes
to be redeemed. In addition, we may redeem the notes, in whole or in part, at
any time before November 15, 2009 at a redemption price plus a “make-whole”
premium. We must offer to purchase the notes if we experience specific kinds of
changes of control or sell assets under certain circumstances.





Item
4.  Controls and
Procedures





Evaluation of Disclosure Controls
and Procedures.  As of the end of the period covered by this report,
we carried out an evaluation, under the supervision and with participation of
management, including our Chief Executive Officer and our Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act).  In evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.  Based on their evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this report.





Changes in Internal Controls over
Financial Reporting.    There has been no change in
the Company’s internal controls over financial reporting during the Company’s
most recent fiscal quarter that has materially affected, or is reasonable likely
to materially affect, the Company’s internal controls over financial
reporting.  We are currently in the process of assessing and
integrating Gemstar’s internal controls over financial reporting into our
financial reporting systems and expect to complete our integration




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 activities
over the next three to six months.  Prior to being acquired by us,
Gemstar was a public company.  In conjunction with Gemstar’s Form 10-K
for the year ended December 31, 2007, Gemstar’s management reported in its
assessment that as of December 31, 2007, Gemstar maintained effective internal
controls over financial reporting, based on the framework in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.  In addition, Gemstar’s independent registered
public accounting firm issued an opinion that Gemstar maintained, in all
material respects, effective internal control over financial reporting as of
December 31, 2007, based on the Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.
  - 35
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PART
      II.  OTHER INFORMATION




Item 1.  Legal Proceedings





We are
involved in legal proceedings related to intellectual property rights and other
matters.  The following legal proceedings include those of Macrovision
Solutions Corporation and its subsidiaries.





Patent and Anti-Trust
Litigation





ODS Technologies, L.P. v. Magna
Entertainment Corp., HRTV, Inc. and XpressBet, Inc., in the United States
District Court for the Central District of California. On May 17, 2007,
Gemstar’s subsidiary ODS Technologies, L.P. (“ODS”, which does business as TVG
Network) filed a patent infringement complaint – and later, an amended
complaint, against Magna Entertainment Corp. (“MEC”), HRTV, LLC (“HRTV”) and
XpressBet, Inc. (“XpressBet”) in the United States District Court for the
Central District of California. ODS asserts that defendants infringe five of its
patents related to interactive off-track wagering systems. ODS seeks injunctive
relief prohibiting further infringement by defendants as well as damages,
including damages attributable to defendants’ allegedly willful infringement. In
response, MEC, XpressBet and HRTV asserted that they do not infringe the subject
patents, that the subject patents are invalid, and that the subject patents are
unenforceable.  On June 25, 2008, MEC and XpressBet filed a motion for
summary judgment asserting that neither of them infringe the asserted claims of
the ‘354 patent.  The hearing date on that motion has been taken off
calendar pending completion of discovery, which is ongoing.





On
January 23, 2008, Sharp Corporation filed an antitrust complaint with the
European Competition Commission (the “Commission”), requesting that it
investigate alleged antitrust violations by the Company. The complaint alleges
that the Company has exploited its market power and position in the IPG
technology market to exclude competition and harm consumers.  On March
26, 2008 the Company submitted a response to Sharp’s antitrust complaint,
arguing that Sharp’s allegations are without merit, and do not warrant
investigation by the Commission.   In or about October 2008,
Sharp withdrew its support for the complaint, and the Company was subsequently
advised by the Commission that the matter will be closed.





Gemstar Acquisition
Litigation





Martin Henkel v. Battista, et
al., in the Court of Chancery of the State of Delaware. On
December 17, 2007, a purported stockholder class action lawsuit was filed
against Gemstar and members of its Board of Directors alleging that the
then-pending  acquisition of Gemstar was unfair to its stockholders.
The complaint contained a cause of action for breach of fiduciary duty against
Gemstar and members of its Board of Directors. On February 1, 2008, the
plaintiff filed an amended complaint, adding News Corporation as a defendant and
asserting a cause of action against News Corporation for aiding and abetting
breach of fiduciary duty. On March 14, 2008, the parties executed a Memorandum
of Understanding, agreeing to a full settlement of the matter in exchange for
certain supplemental public disclosures related to the proposed acquisition and
attorney fees not to exceed $1.25 million. The court has approved the
settlement.  The settlement documents are expected to be finalized in
the near future, and the class members will receive notification of the
settlement.





Indemnifications





SuperGuide Corporation v. DirecTV
Enterprises, Inc., et al., Civil Action No. 00-CV-144 LT, in the United
States District Court for the Western District of North Carolina. On
March 23, 2001, the Company’s subsidiary, Gemstar Development Corporation
(“GDC”), was added as a third-party defendant in this case.  Plaintiff
SuperGuide Corporation’s (“SuperGuide”) complaint alleged patent infringement by
DirectTV, EchoStar, Thomson Consumer Electronics (“Thomson”), and Hughes
Electronics (collectively, the “Defendants”) with respect to three patents (the
“SuperGuide Patents”) owned by SuperGuide but licensed to GDC.  After being
added as a party, GDC brought claims (i) against SuperGuide for declaratory
relief




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 and for
breach of contract relating to a 1993 license agreement between SuperGuide and
GDC; and (ii) against EchoStar for infringing the SuperGuide Patents within
GDC’s defined fields of use. Pursuant to certain licensing and settlement
agreements between GDC and EchoStar, the claims between GDC and EchoStar were
dismissed with prejudice. During March 2007, the Court held a bench trial on the
licensing issues in the case. On July 20, 2007, the Court ruled in favor of
SuperGuide on those issues. In connection with that ruling, GDC’s counterclaims
against SuperGuide for declaratory judgment and breach of contract were
dismissed with prejudice.





DirecTV
has asserted purported indemnification rights with respect to the SuperGuide litigation. On
September 11, 2007, the Company received notice from DirecTV asserting a
potential right to defense and indemnification. On September 19, 2007, the
Company denied DirecTV’s asserted claims for indemnity. On April 4, 2008,
DirecTV again asserted that the Company is responsible for indemnification of
DirecTV’s costs, fees, liabilities, and expenses associated with the SuperGuide litigation. The
Company responded to DirecTV on April 11, 2008, again denying DirecTV’s renewed
assertion of a right to indemnity.  On June 30, 2008, DirecTV again
wrote to the Company asserting its alleged right to indemnity, and providing
arguments in rebuttal to the Company’s denial.





With
respect to the SuperGuide litigation, in
October 2008, the Company learned that SuperGuide, DirecTV and Thomson filed a
motion for dismissal.  Both DirecTV and Thomson have approached us
with a request that we contribute to the settlement amount(s), but we have not
agreed to such requests.





In April
2005, Gemstar received a notice of a potential claim for indemnification from
DirecTV Group, Inc. (“DirecTV”) as a result of a lawsuit filed by Finisar
Corporation (“Finisar”) against DirecTV in the United States District Court for
the Eastern District of Texas. Finisar alleged that several aspects of the
DirecTV satellite transmission system, including aspects of its
advanced electronic program guide (“EPG”) and the storage, scheduling, and
transmission of data for the EPG, infringed a Finisar patent. On July 7,
2006, the Court awarded Finisar approximately $117 million. In addition,
the Court ordered DirecTV to pay approximately $1.60 per activated set
top box in licensing fees going forward in lieu of an injunction until the
expiration of Finisar’s patent in 2012.  The parties both filed
appeals to the Federal Circuit, which subsequently ruled that the trial court's
construction of certain terms of the patent was too broad, vacated the jury's
verdict of infringement, held that one of the seven patent claims at issue is
invalid, and left standing the remaining six claims for reconsideration by the
trial court. The appeals court also reversed the jury's finding that DirecTV's
infringement was willful.  The Company has not established a reserve
with respect to this matter in its consolidated financial
statements.





Comcast Cable Communications Corp.,
LLC v. Finisar Corporation, in the United States District Court for the
Northern District of California.  In support of a potential claim for
indemnification, Comcast Cable Communications Corp., LLC (“Comcast“) put the
Company on notice that it had received communications from Finisar
Corporation (“Finisar”) asserting infringement of U.S. Patent 5, 404, 505 (the
“‘505 patent”). On July 7, 2006, Comcast filed a declaratory judgment
action in the Northern District of California asking the Court to rule, among
other things, that it does not infringe the ‘505 patent and/or that the patent
is invalid.   On May 15, 2008, Finisar entered into a covenant and
stipulation with Comcast, filed with the California Court, that it would not
assert any claim of the ‘505 patent against Comcast or certain related entities,
other than claim 25.  On July 11, 2008, the Court ruled on Comcast’s
summary judgment motion, finding that claim 25 is invalid, and therefore finding
that Comcast’s non-infringement motion is moot.  Comcast has not taken
any further action insofar as its potential indemnity claim against the Company
is concerned.





Other
Litigation





Thomson, Inc. v. Gemstar – TV Guide
International, Inc., Case No. 29D030805, in the Superior Court of the
State of Indiana for the County of Hamiltonand Thomson, Inc. v. Gemstar Development
Corporation, Case No. 08-CV-0684 SEB, in the United States District Court
for the Southern District of Indiana. On May




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 23, 2008,
Thomson, Inc. (“Thomson”) filed a lawsuit against Gemstar Development
Corporation in an Indiana Federal Court, and against Gemstar – TV Guide
International, Inc., in an Indiana State Court, seeking, among other things,
indemnification from the Company in connection with the SuperGuide Corp v. DirecTV
Enterprises, Inc. et. al matter discussed above.  In both
complaints, Thomson alleged that it entered into multiple agreements with the
Company between 1996 and 2003 that would require the Company to indemnify
Thomson in the SuperGuide
litigation.  Specifically, Thomson asserts causes of action for
fraud/fraudulent inducement, breach of contract, breach of implied in fact
indemnity and warranty of title against infringement, and unjust
enrichment.  The lawsuits seek a declaration from the Court that the
Company owes Thomson defense and indemnity for claims regarding the patents at
issue in the SuperGuide
matter, compensatory damages, including fees and expenses paid by Thomson in the
connection with the SuperGuide matter, the return
of royalties paid by Thomson to the Company under the aforementioned agreements,
pre and post-judgment interest, punitive damages, attorney fees, and costs of
suit.  On July 1, 2008 Thomson dismissed the federal case and filed an
amended complaint in the state court case, adding Gemstar – TV Guide
International, Inc as a party to that action.  The Company’s response
to Thomson’s amended complaint was filed on July 21, 2008. Thomson had made
previous demands for indemnity in connection with the SuperGuide litigation in 2000
and 2007, which were denied by the Company, and in May 2001, the parties had
entered into an agreement to toll the statute of limitations with respect to
certain related issues.





In
addition to the items listed above, Macrovision Solutions Corporation is party
to various legal actions, claims and proceedings as well as other actions,
claims and proceedings incidental to its business. Macrovision Solutions
Corporation has established loss provisions only for matters in which losses are
probable and can be reasonably estimated. Some of the matters pending against
Macrovision Solutions Corporation involve potential compensatory, punitive or
treble damage claims, or sanctions, that if granted, could require them to pay
damages or make other expenditures in amounts that could have a material adverse
effect on their financial position or results of operations. At this time
management has not reached a determination that any of the matters listed above
or Macrovision Solutions’ other litigation are expected to result in liabilities
that will have a material adverse effect on our financial position or results of
operations or cash flows.





In
management’s opinion, none of these other disputes and legal actions is expected
to have a material impact on our consolidated financial position, results of
operations or cash flows.





Item 1A.  Risk Factors





A description of the risk factors
associated with our business is included under “Risk Factors” contained in Item
1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2008 and
is incorporated herein by reference.  There have been no material
changes in our risk factors since the filing of our last Quarterly
Report.





Item 2.  Unregistered Sales of Equity Securities
and Use of Proceeds





None.





Item 3. Defaults Upon Senior
Securities.





None.





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Item 4.  Submission of Matters to a Vote of Security
Holders





Macrovision
Solutions Corporation held a special meeting of its stockholders on July 15,
2008 for purposes of approving the adoption of the Company’s (i) 2008 Equity
Incentive Plan (the “2008 Equity Plan”) comprising 14,300,000 shares of the
Company’s common stock reserved for issuance under the 2008 Equity Plan and (ii)
2008 Employee Stock Purchase Plan (the “2008 ESPP”) comprising 7,500,000 shares
of the Company’s common stock reserved for issuance under the 2008
ESPP.  The adoption of the 2008 Equity Plan and 2008 ESPP were
approved by the following votes of Macrovision Solutions Corporation
stockholders:





2008 Equity
Plan:





Votes
      For
            
            Votes
      Against
            
            Abstentions60,319,398
            
            12,199,751
            
            160,104





2008
ESPP:





Votes
      For
            
            Votes
      Against
            
            Abstentions67,132,580
            
            5,381,812
            
            164,860





Item 5. Other Information





None.





Item 6.  Exhibits





Incorporated
      by ReferenceExhibit
      Number
            
            Exhibit
      Description
            
            Form
            
            Date
            
            Number
            
            Filed
      Herewith10.1
            
            Macrovision
      Solutions Corporation 2008 Equity Incentive Plan
            
            S-8
            
            7/23/08
            
            10.110.2
            
            Macrovision
      Solutions Corporation 2008 Employee Stock Purchase Plan
            
            S-8
            
            7/23/08
            
            10.210.3
            
            Asset
      Purchase Agreement, dated October 10, 2008, among TV Guide Magazine Group,
      Inc., Sample Media, LLC and Macrovision Solutions
    Corporation
            
            8-K
            
            10/14/08
            
            10.110.4
            
            Form
      of Notice of Stock Option Grant/Nonstatutory Stock Option Agreement (U.S.)
      pursuant to Macrovision Solutions Corporation 2008 Equity Incentive
      Plan
            
            
            
            
            
            
            
            X10.5
            
            Form
      of Notice of Stock Option Grant/Nonstatutory Stock Option Agreement
      (Director grant form) pursuant to Macrovision Solutions Corporation 2008
      Equity Incentive Plan
            
            
            
            
            
            
            
            X10.6
            
            Form
      of Notice of Restricted Stock Award/Restricted Stock Award Agreement
      (U.S.) pursuant to Macrovision Solutions Corporation 2008 Equity Incentive
      Plan
            
            
            
            
            
            
            
            X





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-




31.01
            
            Certification
      of the Chief Executive Officer pursuant to Securities Exchange Act Rules
      13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.
            
            
            
            
            
            
            
            X31.02
            
            Certification
      of the Principal Financial Officer pursuant to Securities Exchange Act
      Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.
            
            
            
            
            
            
            
            X32.01
            
            Certification
      of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
            
            
            
            
            
            
            
            X32.02
            
            Certification
      of the Principal Financial Officer pursuant to 18 U.S.C Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
            
            
            
            
            
            
            
            X




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-


SIGNATURES








In
accordance with 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.








Macrovision
Solutions Corporation






Authorized
Officer:





Date:  November
      6, 2008
            By:   /s/ Alfred J.
      AmorosoAlfred
      J. AmorosoChief
      Executive Officer











Principal
      Financial Officer :





Date:  November
      6, 2008
            By:   /s/ James
      BudgeJames
      BudgeChief
      Financial Officer












Principal
      Accounting Officer:





Date:  November
      6, 2008
            By:   /s/ Peter C.
      HaltPeter
      C. HaltChief
      Accounting Officer
















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