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 March 31, 2009





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, 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 May 1, 2009Common
      stock, $0.001 par value
            101,133,696














MACROVISION SOLUTIONS
      CORPORATIONFORM 10-QINDEXPART I - FINANCIAL
      INFORMATION




PageItem
      1.
            Unaudited
      Financial StatementsCondensed
      ConsolidatedBalance Sheetsas of March 31,
      2009 and December 31, 2008
            1Condensed
      Consolidated Statements of Operationsfor
      the Three Months Ended March 31, 2009 and
      2008
            2Condensed
      Consolidated Statements of Cash Flowsfor the
      Three Months Ended March 31, 2009 and 2008
            3Notes
      to Condensed Consolidated Financial
      Statements
            4Item 2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            19Item 3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            27Item
      4.
            Controls
      and
      Procedures
            28PART
      II - OTHER
      INFORMATIONItem 1.
            Legal
      Proceedings
            29Item 1A.
            Risk
      Factors
            30Item 2.
            Unregistered
      Sales of Equity Securities and Use of
      Proceeds
            30Item
      3.
            Defaults
      Upon Senior
      Securities
            30Item 4.
            Submission
      of Matters to a Vote of Security
      Holders
            30Item
      5.
            Other
      Information
            30Item
      6.
            Exhibits
            31Signatures
            
            32







PART
I.      FINANCIAL INFORMATION





Item 1.     Financial
Statements





MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


(In
thousands)


(Unaudited)





ASSETS




March 31,
                                              
                                              December
  31,2009
                                              
                                              2008Current
    assets:Cash and cash
      equivalents
                                              $           218,546
                                              
                                              $          199,188Short-term
      investments
                                              85,430
                                              
                                              77,914Trade accounts
      receivable, net
                                              83,737
                                              
                                              84,020Deferred tax assets,
      net
                                              26,805
                                              
                                              29,537Prepaid expenses and
      other current assets
                                              13,492
                                              
                                              12,053Assets held for
      sale
                                              -
                                              
                                              329,522Total current assets
                                              428,010
                                              
                                              732,234Long-term marketable
      securities
                                              80,500
                                              
                                              84,955Restricted
    cash
                                              36,782
                                              
                                              -Property and equipment,
      net
                                              38,777
                                              
                                              45,352Finite-lived intangible assets,
      net
                                              874,789
                                              
                                              895,071Other
assets
                                              40,845
                                              
                                              50,387Goodwill
                                              837,372
                                              
                                              828,185$        2,337,075
                                              
                                              $        2,636,184







LIABILITIES
      AND STOCKHOLDERS’ EQUITY





Current
      liabilities:Accounts
      payable
                                            $                   3,372
                                            
                                            $               3,486Accrued
      expenses
                                            89,058
                                            
                                            82,200Taxes
      payable
                                            28,365
                                            
                                            8,996Deferred
      revenue
                                            13,799
                                            
                                            14,376Current portion of
      debt and capital lease obligations
                                            342
                                            
                                            5,842Liabilities held for
      sale
                                            -
                                            
                                            56,021Total current liabilities
                                            134,936
                                            
                                            170,921Taxes payable, less current
      portion
                                            73,990
                                            
                                            73,009Deferred tax liability,
      net
                                            10,753
                                            
                                            9,914Long-term debt and capital lease
      obligations, less current portion
                                            622,940
                                            
                                            855,160Deferred revenue, less current
      portion
                                            4,484
                                            
                                            4,909Other non current
      liabilities
                                            9,047
                                            
                                            7,076856,150
                                            
                                            1,120,989Stockholders’
      equity:Common
      stock
                                            103
                                            
                                            103Treasury
      stock
                                            (25,068)
                                            
                                            (25,068)Additional paid-in
      capital
                                            1,610,238
                                            
                                            1,602,667Accumulated other
      comprehensive loss
                                            (5,205)
                                            
                                            (4,879)Accumulated
      deficit
                                            (99,143)
                                            
                                            (57,628)Total stockholders’ equity
                                            1,480,925
                                            
                                            1,515,195$             2,337,075
                                            
                                            $         2,636,184




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




- 1
-


MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(In
thousands, except per share data)


(Unaudited)


Three Months
      EndedMarch
31,2009
                                                                                      
                                                                                      2008Revenues
                                                                                      $            111,158
                                                                                      
                                                                                      $           
      30,295Costs and
      expenses:Cost of
      revenues
                                                                                      15,170
                                                                                      
                                                                                      3,933Research and
      development
                                                                                      23,024
                                                                                      
                                                                                      5,073Selling, general and
      administrative
                                                                                      32,131
                                                                                      
                                                                                      14,668Depreciation
                                                                                      4,549
                                                                                      
                                                                                      804Amortization
                                                                                      20,259
                                                                                      
                                                                                      3,065Restructuring and
      asset impairment charges
                                                                                      7,971
                                                                                      
                                                                                      -Total costs and
      expenses
                                                                                      103,104
                                                                                      
                                                                                      27,543Operating income from continuing
      operations
                                                                                      8,054
                                                                                      
                                                                                      2,752Interest
      expense
                                                                                      (17,578)
                                                                                      
                                                                                      (4,018)Interest income and
      other, net
                                                                                      1,455
                                                                                      
                                                                                      5,606Gain on sale of
      strategic investments
                                                                                      -
                                                                                      
                                                                                      5,238(Loss) income from continuing
      operations before income taxes
                                                                                      (8,069)
                                                                                      
                                                                                      9,578Income tax (benefit)
      expense
                                                                                      (2,724)
                                                                                      
                                                                                      2,156(Loss) income from continuing
      operations, net of tax
                                                                                      (5,345)
                                                                                      
                                                                                      7,422Discontinued operations, net of
      tax
                                                                                      (36,170)
                                                                                      
                                                                                      (2,392)Net (loss)
      income
                                                                                      $             (41,515)
                                                                                      
                                                                                      $   
              
        5,030Basic (loss) income per
      share:Basic (loss) income
      per share from continuing operations
                                                                                      $                 (0.05)
                                                                                      
                                                                                      $                 0.13Basic loss per share
      from discontinued operations
                                                                                      $                 (0.36)
                                                                                      
                                                                                      $              (0.04)Basic net (loss)
      income per share
                                                                                      $                 (0.41)
                                                                                      
                                                                                      $                 0.09Shares used in computing basic net
      earnings per share
                                                                                      100,942
                                                                                      
                                                                                      54,030Diluted (loss) income per
      share:Diluted (loss)
      income per share from continuing operations
                                                                                      $                 (0.05)
                                                                                      
                                                                                      $                 0.13Diluted loss per
      share from discontinued operations
                                                                                      $                 (0.36)
                                                                                      
                                                                                      $              (0.04)Diluted net (loss)
      income per share
                                                                                      $                 (0.41)
                                                                                      
                                                                                      $                 0.09Shares used in computing diluted
      net earnings per share
                                                                                      100,942
                                                                                      
                                                                                      54,078
   See the
accompanying notes to the unaudited condensed consolidated financial
statements.




-
2 -





MACROVISION
SOLUTIONS CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)




Three Months
      EndedMarch
    31,2009
                                                              2008Cash flows from operating
      activities:Net (loss)
      income
                                                              $      (41,515)
                                                              $         5,030Adjustments to reconcile net
      (loss) income to net cash provided by operations:(Income) loss from
      discontinued operations, net of tax
                                                              (583)
                                                              2,392Loss on disposition
      of discontinued operations
                                                              3,468
                                                              -Depreciation and
      amortization
                                                              24,808
                                                              3,869Amortization of note
      issuance costs and FSP APB 14-1 discount
                                                              6,515
                                                              2,414Equity-based
      compensation
                                                              4,653
                                                              2,285Restructuring and
      asset impairment charge
                                                              4,142
                                                              -Deferred
      taxes
                                                              6,650
                                                              (790)Gain on sale of
      strategic investment
                                                              -
                                                              (5,238)Changes in operating assets and
      liabilities, net of assets and liabilities
acquired:Accounts receivable,
      net
                                                              284
                                                              12,058Deferred
      revenue
                                                              (1,002)
                                                              1,274Prepaid expenses,
      other current assets and other assets
                                                              1,434
                                                              1,502Income
      taxes
                                                              20,350
                                                              (177)Accounts payable,
      accrued expenses, and other long-term liabilities
                                                              (13,067)
                                                              (19,748)Net cash provided by operating
      activities of continuing operations
                                                              16,137
                                                              4,871Net cash provided by operating
      activities of discontinued operations
                                                              1,184
                                                              3,838Net cash provided by operating
      activities
                                                              17,321
                                                              8,709Cash flows from investing
      activities:Proceeds from disposition of
      businesses, net
                                                              281,400
                                                              -Reclass portion of sales proceeds
      from disposition of business to restricted cash
                                                              (36,782)
                                                              -Purchases of long and short term
      marketable investment securities
                                                              (15,176)
                                                              (143,197)Sales or maturities of long and
      short term marketable investments
                                                              13,207
                                                              294,612Purchases of property and
      equipment
                                                              (2,427)
                                                              (592)Other
    investing
                                                              -
                                                              (1,654)Net cash provided by investing
      activities of continuing operations
                                                              240,222
                                                              149,169Cash flows from financing
      activities:Principal payments under capital
      lease and debt obligations
                                                              (240,002)
                                                              (608)Proceeds from exercise of options
      and other financing activities
                                                              2,914
                                                              3,485Net cash (used in) provided by
      financing activities of continuing operations
                                                              (237,088)
                                                              2,877Net cash used in financing
      activities of discontinued operations
                                                              (114)
                                                              -Net cash (used in) provided by
      financing activities
                                                              (237,202)
                                                              2,877Effect of exchange rate changes on
      cash
                                                              (983)
                                                              704Net increase in cash and cash
      equivalents
                                                              19,358
                                                              161,459Cash and cash equivalents at
      beginning of period
                                                              199,188
                                                              134,070Cash and cash equivalents at end
      of period
                                                              $     218,546
                                                              $     295,529


See
the accompanying notes to the unaudited condensed consolidated financial
statements.
 
 -
3 -







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.




On April 1, 2008, the
Company sold its software and games businesses (referred to as “Software” and
“Games”, respectively).  In November 2008, the Company sold its
RightCommerce (also know as “eMeta”) business.  In December 2008, the
Company sold its TV Guide Magazine business.  In January 2009, the
Company sold its TVG Network business and in February 2009, the Company sold its
TV Guide Network and TV Guide Online businesses.  Together TV Guide
Magazine, TVG Network, TV Guide Network and TV Guide Online are referred to as
the “Media Properties”.  The results of operations andcash flowsof Software, Games, eMeta and the Media
Properties have been classified as discontinued operations for all periods
presented (See Note 3).




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.  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 Solutions
Corporation’s 2008 Annual Report on Form 10-K.




The Condensed
Consolidated Statements of Operations for the interim periods presented are not
necessarily indicative of the results expected for the entire year ending
December 31, 2009, 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.





NOTE
2 – ACQUISITIONS





Gemstar
Acquisition




On May 2, 2008, the
Company acquired Gemstar in a cash and stock transaction for $2.65
billion.  Gemstar was a technology, media and entertainment company
that developed, licensed, marketed and






- 4
-
 
 
 distributed products and services
targeted at the video guidance and entertainment needs of consumers
worldwide.
  The Company, based
upon estimated fair values as of May 2, 2008, made an allocation of the
purchase price to the net tangible and intangible assets acquired.The Company’s purchase price allocation is as
follows (in thousands):





Cash
      and cash equivalents
                    $        663,618Trade
      accounts receivable
                    74,848Property
      and equipment
                    72,546Goodwill
                    932,464Identifiable
      intangible assets
                    1,118,570Other
      assets
                    56,667Accounts
      payable and other liabilities
                    (144,417)Restructuring
      charge (See note 9)
                    (21,162)Deferred
      tax liabilities, net
                    (3,815)Deferred
      revenue
                    (85,461)Capital
      lease obligations
                    (11,898)Total purchase price
                    $      2,651,960








Pro
Forma Financial Information





The pro forma
financial information presented below (in millions) assumes the acquisition of
Gemstar had occurred on January 1, 2007.  The pro forma financial
information does not include the results of Software, Games, eMeta and the Media
Properties as these businesses have been classified as discontinued operations.
The pro forma financial information assumes $275 million of net proceeds from
the sale of the Media Properties reduced the amount of debt issued in
conjunction with acquiring Gemstar.  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
                    March
      31,2008Net
      revenue
                  
                  $       103.7Operating
      income (1)
                  
                  $   
           38.5Income
      from continuing operations (1)
                  
                  $  
            22.2Basic
      and diluted earnings per share from   continuing
      operations
                  
                  $        0.22








(1)
            Includes
      a $32.5 million pre-tax benefit from a Gemstar insurance
      settlement.






-
5 -




NOTE
3 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE




On February
28, 2009, the Company sold its TV Guide Network and TV Guide Online business
units for approximately $244 million in cash, subject to working capital and
other adjustments.  As part of the sale, the Company agreed to deposit
$36.8 million of this cash in an escrow account to serve as a source of recovery
in the event the buyer of TV Guide Network and TV Guide Online has an
indemnifiable claim.  The cash remaining in the escrow account will be
released to the Company 15 months from the close of the sale.  The
Company has recorded this $36.8 million in long-term restricted cash on its
condensed consolidated balance sheet.  As of March 31, 2009, the
Company has accrued liabilities of $11.4 million related to the disposition of
TV Guide Network and TV Guide Online, which it expects to pay in the second
quarter of 2009. As part of the sale the buyer has occupied the leased space
used by TV Guide Network and TV Guide Online and we are in the process of
arranging assignments and / or subleases for such leased
premises.  Total remaining payments under these leases are $19.4
million.





The assets
and liabilities attributable to the Company’s TV Guide Network and TV Guide
Online business units classified in the condensed consolidated balance sheet as
held for sale at December 31, 2008 consist of the following (in
thousands):





December
      31,
                      2008Trade
      accounts receivable, net
                    $    17,320Property
      and equipment, net
                    22,914Other
      assets
                    4,893Goodwill
      and intangible assets
                    223,595Accounts
      payable and other liabilities
                    (11,749)Capital
      lease
                    (11,456)Deferred
      revenue
                    (8,574)Total
      net assets held for sale
                    $   236,943





On January
27, 2009, the Company sold its TVG Network business unit for approximately $50.7
million.  Included in the net assets sold was $11.9 million of
cash.  As of March 31, 2009 the Company has accrued liabilities of
$1.6 million related to the disposition of TVG Network, which it expects to pay
in the second quarter of 2009.




The assets and liabilities attributable to the Company’s TVG Network business
unit classified in the condensed consolidated balance sheet as held for sale at
December 31, 2008 consist of the following (in thousands):





December
      31,
                  2008Trade
      accounts receivable, net
                $    5,255Property
      and equipment, net
                3,927Other
      assets
                1,499Goodwill
      and intangible assets
                50,119Accounts
      payable and other liabilities
                (24,242)Total
      net assets held for sale
                $  36,558





On April 1,
2008, the Company sold its Software business unit for $191 million and its Games
business unit for $4 million in cash.




On November
17, 2008 the Company sold its eMeta business unit for $0.8 million in
cash.






-
6 -
 
 
 
  On December
1, 2008 the Company sold its TV Guide Magazine business unit in exchange for the
assumption of its net liabilities.





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




Three Months
      EndedMarch
31,2009
                                      
                                      2008Net
revenue:Software
                                      
                                      $           -
                                      
                                      $       27,352Games
                                      
                                      -
                                      
                                      1,627eMeta
                                      
                                      -
                                      
                                      1,944TV Guide
      Network / TV Guide Online
                                      
                                      18,363
                                      
                                      -TVG
      Network
                                      
                                      4,562
                                      
                                      -Pre-tax (loss)
      incomeSoftware
                                      
                                      $           -
                                      
                                      $        1,369Games
                                      
                                      -
                                      
                                      (2,563)eMeta
                                      
                                      -
                                      
                                      (1,889)TV Guide
      Network / TV Guide Online
                                      
                                      1,825
                                      
                                      -TVG
      Network
                                      
                                      (694)
                                      
                                      -Pre-tax loss on disposal of
      business units
                                      
                                      (3,468)
                                      
                                      -Income tax (expense) benefit
      (1)
                                      
                                      (33,833)
                                      
                                      691Loss from
      discontinued operations, net of tax
                                      
                                      $   (36,170)
                                      
                                      $       (2,392)






(1)
            The
      $33.8 million in tax expense is primarily due to the sales of TVG Network
      and TV Guide Network / TV Guide Online including goodwill for which the
      Company had no basis for tax
purposes.





NOTE
4 – DEBT





Convertible
Senior Notes




In
August 2006, the Company issued, in a private offering, $240.0 million
in 2.625% convertible senior notes (Convertible Notes) due 2011 at par. The
Convertible Notes may be converted, under certain circumstances, based on an
initial conversion rate of 35.3571 shares of common stock per $1,000 principal
amount of notes (which represents an initial conversion price of approximately
$28.28 per share).




On January 1,
2009, the Company adopted FASB Staff
Position(“FSP”)APB 14-1,Accounting for
Convertible Debt Instruments That May Be Settled in Cash Upon Conversion
(Including Partial Cash Settlement)(“FSP14-1”).  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 Company applied the provisions of FSP 14-1retrospectively to all periodspresentedresultingin an increase to interest expense of $2.1 million,a decrease to net income of
$1.3 millionand a decrease
in diluted income per share of $(0.02)for the three months ended
March 31,
2008.  Additionally, stockholders’equity at December31, 2008 was increased by
$15.9million and long-term
debt was decreased by $26.6
million to a carrying amount of $213.4 million




As of March 31, 2009
and December 31, 2008,the principal amount of the
Company’s Convertible Notes was $240.0 million.  As of
March 31, 2009, the unamortized discount on the Convertible Notesdue




-
7 -
 
 toapplying the provisions of FSP 14-1 was
$24.3 million, resulting in a carrying amount of $215.7
million.During
the three months ended March 31, 2009, the Company recorded $4.1million of interest expense for the
Convertible Notes, of which $2.3 million related to the amortization of the
discount due to applying the provisions of FSP 14-1.




Senior
Secured Term Loan




In connection
with the Gemstar acquisition the Company entered into and fully drew-down a $550
million five year senior secured term loan credit facility (“Term
Loan”).  As required under the Term Loan, during the three months
ended March 31, 2009, the Company used $240.0 million of the proceeds from the
Media Properties sale to pay down the Term Loan balance to $307.2
million.  In addition,
these prepayments accelerated the amortization of note issuance costs resulting
in $2.0 million of additional interest expense.  Unamortized note
issuance costs related to the Term Loan as of March 31, 2009 were $20.5
million.




11% Senior
Notes




In connection
with the Gemstar acquisition the Company issued $100 million of 11% senior notes
(“Senior Notes”) due 2013.  The Senior Notes include customary
covenants, including fixed charge coverage minimums and restrictions on
acquisitions, additional debt incurrence and dividend payments among
others.  Interest is payable at 11% semiannually in arrears on
November 15 and May 15.  Provided that the Term Loan has been repaid,
the Company may redeem some or all of the Senior Notes at any time on or after
November 15, 2009 at a price equal to 100% of the principal amount of notes to
be redeemed.





NOTE
5 – FAIR VALUE MEASUREMENTS




As of March 31, 2009, 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.  In addition, in December 2008, the
Company entered into an agreement with UBS AG which provides (i) the Company the
right (“ARS Put Option”) to sell auction rate securities with a par value of
$62.4 million back to UBS AG at par, at the Company’s sole discretion, anytime
during the period from June 30, 2010 through July 2, 2012, and
(ii) UBS AG the right to purchase these auction rate securities or sell
them on the Company’s behalf at par anytime through July 2, 2012. The
Company elected to measure the Put Option under the fair value option of
Statement of Financial Accounting Standard (“SFAS”) No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities.  The applicable auction rate
securities are classified as trading.




The following
inputs, as defined under SFAS No. 157, Fair Value(“SFAS 157”), were used to determine the
fair value of the Company’s investment securities at March 31, 2009 (in
thousands):




-
8 -


Quoted Prices in Active Markets
      for Identical Assets
                                    Significant Other Observable
      Inputs
                                    Significant Unobservable
      InputsTotal
                                    
                                    (Level 1)
                                    
                                    (Level 2)
                                    
                                    (Level 3)Money market
      funds
                                    
                                    $      179,586
                                    
                                    $             179,586
                                    
                                    $                          -
                                    
                                    $                          -Money market funds (restricted
      cash)
                                    
                                    36,782
                                    
                                    36,782
                                    
                                    -
                                    
                                    -Fixed income available-for-sale
      securities
                                    
                                    88,008
                                    
                                    -
                                    
                                    88,008
                                    
                                    -Auction rate securities
      (Available-for-sale)
                                    
                                    15,547
                                    
                                    -
                                    
                                    -
                                    
                                    15,547Auction rate securities
      (Trading)
                                    
                                    55,709
                                    
                                    -
                                    
                                    -
                                    
                                    55,709ARS Put
    Option
                                    
                                    6,666
                                    
                                    -
                                    
                                    -
                                    
                                    6,666Total
                                    
                                    $      382,298
                                    
                                    $             216,368
                                    
                                    $               88,008
                                    
                                    $               77,922
 
 The Company’s
fixed income available-for-sale securities consist of corporate debt securities,
US Treasuries and municipal
securities.





The interest
rate reset auction events for the Company’s auction rate securities have failed
since early 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.




The following
table provides a summary of changes in the Company’s Level 3 auction rate
securities and ARS Put Option as of March 31, 2009 (in thousands):




Balance at December 31,
      2008
                                $       76,717Gain on ARS classified as trading
      and recorded in other income
                                3,704Unrealized gain included in
      accumulated other comprehensive income
                                1,205ARS Put Option loss recorded in
      other income
                                (3,704)Purchases and settlements,
      net
                                -Balance at March 31,
      2009
                                $       77,922
 
 The Company’s
auction rate securities portfolio at March 31, 2009 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 March 31,
2009. The Company continues to earn interest on all of its auction rate security
instruments.





On January 1,
2009, the Company adopted FSP SFAS 157-2, (“FSP 157-2”). FSP 157-2 deferred the
effective date of SFAS 157 as it relates to non-financial assets and liabilities
including 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, to allow the FASB and constituents additional time to
consider the effect of various implementation issues that have arisen, or that
may arise, from the application of SFAS 157.  The adoption of FSP
157-2 did not have a material impact on the Company’s financial position or
operating results.




- 
9 -





NOTE
6 – EQUITY-BASED COMPENSATION





Stock Options
Plans





During the
quarter ended March 31, 2009, the Company granted stock options and restricted
stock awards from the 2008 Equity Incentive Plan (the “2008 Plan”) and the 2000
Equity Incentive Plan (the “2000 Plan”).




As of March
31, 2009, the Company had 29.6 million shares reserved and
15.1 million shares remained available for issuance under the 2000 and 2008
Plans. The 2000 and 2008 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 first quarter of 2009, the vesting period was
generally four years where one quarter vests at the end of the first year, and
the remainder vests monthly.  Option grants have contractual terms
ranging from five to ten years.




Restricted
stock awards were issued from the 2008 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 March 31, 2009, the number of shares awarded but unvested was 0.7 million
under the 2000 Plan and 0.2 million under the 2008 Plan.




Employee
Stock Purchase Plan




The Company’s
2008 Employee Stock Purchase Plan (the “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 March
31, 2009, the Company had reserved 7.5 million shares under the 2008 ESPP, and
has 7.3 million shares available for future issuance.




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.




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 uses the “simplified method”
as permitted under Staff Accounting Bulletin No. 110.  For options
granted after July 15, 2008, the Company changed its standard 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.




-
10 -


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), Share Based Payments, 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
record 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
                    March
      31,2009
                  
                  2008Option
      Plans:Dividends
                  None
                  
                  NoneExpected
      term
                  4.6
      years
                  
                  3.0
      yearsRisk
      free interest rate
                  1.9%
                  
                  2.7%Volatility
      rate
                  47%
                  
                  43%ESPP
      Plan:Dividends
                  None
                  
                  NoneExpected
      term
                  1.3
      years
                  
                  1.3
      yearsRisk
      free interest rate
                  0.8%
                  
                  2.1%Volatility
      rate
                  53%
                  
                  45%




As of March
31, 2009, there was $34.2 million of unrecognized compensation cost for
continuing operations, adjusted for estimated forfeitures, related to unvested
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 2.5 years.




The weighted
average fair value of options granted during the three months ended March 31,
2009 and March 31, 2008 was $6.34 and $5.58, respectively.  The
weighted average grant date fair value of an employee purchase share right
granted during the three months ended March 31, 2009 and March 31, 2008 was
$3.04 and $4.53, respectively.  The weighted average fair value of a
restricted stock award granted during the three months ended March 31, 2009 and
March 31, 2008 was $15.73 and $15.49 respectively.




The total
intrinsic value of options exercised during the three months ended March 31,
2009 was $0.2 million. 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 7 – 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, 2008
                $    828,185Changes due to foreign currency exchange rates and other
                3,672Gemstar purchase accounting adjustments
                5,515Goodwill,
      net at March 31, 2009
                $  837,372





-
11 -




The Company’s
finite-lived intangible assets associated with its continuing operations are as
follows (in thousands):





March
      31, 2009Gross
      Costs
                  
                  Accumulated
                    Amortization
                  
                  NetFinite-lived  intangibles:Developed
      technology and patents
                  $    826,799
                  
                  $    (78,564)
                  
                  $    748,235Existing contracts
      and   customer relationships
                  43,591
                  
                  (7,788)
                  
                  35,803Content
      databases
                  44,674
                  
                  (5,930)
                  
                  38,744Trademarks /
      Tradenames
                  55,043
                  
                  (3,036)
                  
                  52,007$   970,107
                  
                  $    (95,318)
                  
                  $    874,789







December
      31, 2008Gross
      Costs
                
                Accumulated
                  Amortization
                
                NetFinite-lived  intangibles:Developed technology and
      patents
                $      826,968
                
                $      (61,438)
                
                $      765,530Existing contracts and
      customer relationships
                43,635
                
                (6,800)
                
                36,835Content
      database
                44,652
                
                (4,690)
                
                39,962Trademarks /
      Tradenames
                55,047
                
                (2,303)
                
                52,744$    970,302
                
                $      (75,231)
                
                $     895,071







As of March
31, 2009, the Company estimates its amortization expense in future periods to be
as follows (in thousands):





Amortization
                  ExpenseRemainder
      of 2009
                
                $     60,7562010
                
                78,5192011
                
                75,5362012
                
                74,9812013
                
                72,936Thereafter
                
                512,061Total
      amortization expense
                
                $   874,789





NOTE
8 – STRATEGIC INVESTMENT SALE




During the
first quarter of 2008, the Company recognized a gain of $5.2 million on the sale
of its investment in Digimarc Corporation.





NOTE
9 – RESTRUCTURING AND ASSET IMPAIRMENT CHARGES




Q109
Restructuring Plan




In
conjunction with the disposition of the Media Properties, the Company’s
management approved several actions resulting in a restructuring and asset
impairment charge of $8.4 million.  This was done to




- 12
-






create
cost efficiencies for the Company now that it no longer supports the Media
Properties.  These charges included $1.3 million in severance, a $2.9
million liability for the fair value of future lease payments on abandoned
office space and $4.2 million in non–cash asset impairment charges related to
the abandoned office space.




Gemstar
Acquisition Restructuring Plan




In conjunction with
the Gemstar acquisition, management acted upon a pre-acquisition plan to
restructure certain Gemstar operations resulting in severance of $21.2 million.
This was done in order to create cost efficiencies for the combined Company. The
severance liability was recognized as an assumed liability in the Gemstar
acquisition and, accordingly, resulted in an increase to goodwill.As of December 31, 2008 the Company had
paid $19.1 million of these costs and had a remaining liability of $2.1
million.  In the three months ended March 31, 2009, the Company paid
$1.6 million of these costs resulting in aremaining liability of $0.5million.Restructuring accruals are classified on
the balance sheet as “Accrued expenses”. The Company anticipates paying the
remaining liability in thesecondand thirdquartersof 2009.




Fiscal 2007
Restructuring Plans




During fiscal year
2007, the Company’s Board of Directors approved several restructuring actions
and an organizational realignment program. In addition, the Company discontinued
its Hawkeye anti-piracy service.As of December 31, 2008, the Company had
$0.4 million in accrued liabilities relating to these restructuring
actions.  During the three months ended March 31, 2009, the Company
reversed the remaining $0.4 million in liabilities.  This reversal was
recorded in restructuring and asset impairment chargesin the condensed consolidated statement
of operations.







NOTE
10 – 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
                                    March
31,2009
                                  
                                  2008Basic EPS – weighted average
      number of common shares outstanding
                                  
                                  100,942
                                  
                                  54,030Effect of dilutive common
      equivalent shares
                                  
                                  -
                                  
                                  48Diluted EPS – weighted average
      number of common shares and common equivalent shares
      outstanding
                                  
                                  100,942
                                  
                                  54,078






-
13 -


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
                                      March
31,2009
                                    
                                    2008Stock
    options
                                    
                                    7,955
                                    
                                    4,474Restricted
      stock
                                    
                                    485
                                    
                                    985Warrants
                                    
                                    7,955
                                    
                                    7,955Convertible senior
      notes
                                    
                                    8,486
                                    
                                    8,486Total weighted average potential
      common shares excluded from diluted net earnings per
      share
                                    
                                    24,881
                                    
                                    21,900


NOTE
11 – COMPREHENSIVE (LOSS) INCOME




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




Three Months
      Ended
                                      March
31,2009
                                    
                                    2008Net (loss)
      income
                                    
                                    $
      (41,515)
                                    
                                    $    5,030Other comprehensive (loss)
      income:Unrealized gains (losses) on
      investments (1)
                                    
                                    1,093
                                    
                                    (5,431)Foreign currency translation
      adjustments
                                    
                                    (1,419)
                                    
                                    928Comprehensive (loss)
      income
                                    
                                    $
      (41,841)
                                    
                                    $       527


(1)
Changes in unrealized (losses) gains on investments during the three months
ended March 31, 2008 include the reduction of $3.2 million, net of taxes, of
unrealized gains related to Digimarc Corporation.  These gains became
realized gains when the Company sold this investment during the first quarter of
2008 (see Note 8).





NOTE
12 – RECENT ACCOUNTING PRONOUNCEMENTS




In March 2008, the
FASB issuedSFASNo.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 andlocation of derivativeswithin 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.The adoption of SFAS 161 primarily
affected disclosure requirements and did not have a material impact on the
Company’sfinancial position or operating
results.




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




-
14 -




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.The adoption of SFAS 160 primarily
affected disclosure requirements and did not impact the Company’s financial
position or operating results.




In
December 2007, the FASB issued SFAS No. 141 (revised
2007),Business Combinations(“SFAS 141(R)”).Newrequirements under the revised standard
include: (i) the fair value of stock provided as consideration be measured as of
the acquisition date instead of the announcement date; (ii) acquisition-related
costs be recognized separately from the acquisition, generally as an expense,
instead of treated as a part of the cost of the acquisition that was allocated
to the assets acquired and the liabilities assumed;  (iii)
restructuring costs that the acquirer expected, but was not obligated to incur,
be recognized separately from the acquisition instead of recognized as if they
were a liability assumed at the acquisitiondate; (iv) contingent considerationbe recognizedat the acquisition date, measured at its
fair value at that date,
instead ofrecognized when
the contingency was resolved and consideration was issued or became
issuable; (v)recognizing a gain whenthefair value of the identifiable net
assets acquired exceeds the fair value of the consideration
transferredinstead of
allocatingthe “negative
goodwill” amountas a pro rata reduction of the amounts
that otherwise would have been assigned to particular assets
acquired; (vi)research and development assets acquired
in a business combination willberecognizedattheiracquisition-date fair
valuesasassets acquired in a business
combinationinstead of
beingmeasured at their
acquisition-date fair values and thenimmediately charged to expense; and
(vii)changes in the amount
of deferred tax benefitscreated ina business combination, outside of the valuation
period,will be recognizedeither in income from continuing
operations or directly in contributed capital, depending on the
circumstances, instead of
recognized through a
corresponding reduction to goodwill or certain noncurrent assets or an increase
in so-called negative goodwill.SFAS 141(R) is effective for the Company
for transactions consummated during annual periods beginning after
December 15, 2008.The
adoption of SFAS 141(R) did not have a material impact on the Company’s
financial position or results from operations.




In April 2008, the
FASB issued FSPSFAS 142-3,Determination of
the Useful Life of Intangible Assets(“FSP 142-3”). FSP142-3 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”) in orderto 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).The adoption of FSP 142-3 did not have a
material impact on the Company’s financial position or results from
operations.




In April 2009 the
FASB issuedFSPSFAS 107-1 and APB 28-1,Interim Disclosures
about Fair Value of Financial Instruments(“FSP 107-1”). The Company will adopt
FSP 107-1 during the quarter ended June 30, 2009.  FSP 107-1 requires
additional disclosures about the Company’s financial instruments in interim
financials and therefore the Company does not anticipate the adoption of FSP
107-1 will have a material impact on its financial position or results from
operations.




In April 2009 the
FASBissued FSP SFAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (“FSP 115-2”).  FSP 115-2
replaces the existing requirement that management assert it has both the intent
and ability to hold an impaired security until recovery with the requirement
that management assert: (i) it does not have the intent to sell the security;
and (ii) it is more likely than not it will not have to sell the security before
recovery of its cost basis.  FSP 115-2 also incorporates examples of
factors from existing literature that should be considered in determining
whether a debt security is other-than-temporarily impaired.  The
Company will adopt FSP 115-2 during the quarter ended June 30, 2009 and does not
anticipate that the adoption will have a material impact on its financial
position or results from operations.




In April 2009 the
FASBissued FSP SFAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That




-
15 -




are Not Orderly (“FSP
157-4”).  FSP 157-4 affirms that the objective of fair value when the
market for an asset is not active, is the price that would be received to sell
the asset in an orderly transaction and clarifies and includes additional
factors for determining whether potentially comparative transactions are orderly
transactions or transactions that are not orderly (that is, distressed or
forced).  The Company will adopt FSP 157-4 during the quarter ended
June 30, 2009 and does not anticipate that the adoption will have a material
impact on its financial position or results from operations.





NOTE
13 – INCOME TAXES




The Company
recorded an income tax benefit of $2.7 million and income tax expense of $2.2
million for its continuing operations for three months ended March 31, 2009
and 2008, respectively. Income tax benefit for the three months ended March 31,
2009 includes a discrete tax benefit of $1.9 million resulting from the
enactment of a California tax law change during the quarter which reduced the
balance of deferred tax liabilities expected to be paid in 2011 and years
thereafter.  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.




In assessing
the realizability of deferred tax assets, the Company considers whether it is
more likely than not that some portion 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 these
deductible differences, net of valuation allowances, as of March 31, 2009,
will be realized.




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. With few exceptions, the Company is no longer subject to income tax
examinations for years before 2004.





NOTE
14 – 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 theterms 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 ofits advanced electronic program guide
(“EPG”) and the storage, scheduling, and
transmission of data for the EPG, infringed aFinisar patent. On




-16
-


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 expirationof 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 theseven 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 theUnited StatesDistrict 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
hadreceived
communications from Finisar Corporation (“Finisar”) assertinginfringement of U.S. Patent
5,404,505 (the
“‘505 patent”). On July 7, 2006, Comcastfiled 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.




Gemstar Acquisition
Litigation




Martin Henkel v. Battista, et al.in the Court of Chancery of the State ofDelaware.  On December 16, 2008,the court issued an order approving the
settlement between the parties.  During the quarter-ended March 31, 2009,
as part of the settlement,
the Company paid $1.1 milliontoward plaintiffs’legalfees and the Company’s insurance carrier reimbursed the Company for $0.8
millionof that
amount.  The settlement is now final and the class members have received
notification of the settlement.




Other Litigation





Thomson, Inc. v.
Gemstar—TV Guide
International, Inc., in the Superior Court of the State ofIndianafor theCountyofHamilton. On May23, 2008, Thomson, Inc. (“Thomson”) initiated this action, seeking, among
other things, indemnification from the Company in connection with its settlement
of the patent claims
against it inSuperGuide
Corporation v. DirecTV Enterprises, Inc., et al., in the United States District Court
for the Western District of North Carolina. Thomson alleges that it entered
into multiple agreements with the Company between 1996 and2003 that would require the Company to
indemnify Thomson in theSuperGuidelitigation. 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. Thomson seeks a declaration from the Court that the Company
owes Thomson defense and indemnity for SuperGuide’s claims, compensatory damages,
including fees and expenses paid by Thomson in that case, 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.  The case is set for trial in June
2009.




DIRECTV, Inc. v.
Gemstar-TV Guide Interactive, Inc., American Arbitration Association -Los Angeles.  On March 20, 2009, DIRECTV,
Inc. (“DIRECTV”) filed this arbitration demand seeking
indemnity for payments made in settlement of two patent infringement
lawsuits, including theSuperGuide
Corporation v. DirecTV Enterprises, Inc., et
al.matter.DIRECTV seeks indemnity
under the November




-
17 -


21, 2003 License and Distribution
Agreement and Patent License Agreement between the partiesand claims damages plus interest and its
arbitration-related attorneys’fees.We have filed a Response and Counterclaim for
breach of contract.No hearing date has been
set.




In addition to the
items listed above,MacrovisionSolutions Corporation is party to
various legal actions, claims and proceedings as well as other actions, claims
andproceedings incidental
to its business.MacrovisionSolutions Corporation has established
loss provisions only for matters in which losses are probable and can be
reasonably estimated. Some of the matters pending againstMacrovisionSolutions Corporationinvolve potential 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 our
financial position or results of operations. At this time management
hasnot reached a determination that any of
the matters listed above orMacrovisionSolution Corporation’s 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
15 – SUBSEQUENT EVENTS




On April 30,
2009, the Company acquired substantially all of the assets of Muze, Inc.
(“Muze”) for approximately $16.5 million in cash.  Muze provides
metadata on video, music, games and books to retailers, Internet destinations,
software producers, consumer electronics manufacturers and mobile service
providers in the United States and Europe.  The Company acquired Muze
to expand its worldwide entertainment metadata portfolio.




On May 6,
2009, the Company made a $50 million voluntary pay down on its Term Loan (See
Note 4).






-
18 -


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 for the year ended
December 31, 2008 as filed with the SEC.





Overview




Macrovision Solutions
Corporation is focused onpowering the discovery and enjoyment of digital
entertainment by providing a broad set of integrated solutions that are embedded
in our customers’ products and services and used by end consumers to simplify
and guide their interaction with digital entertainment.  Our offerings
include interactive program guides (IPGs), embedded licensing technologies,
media recognition technologies and licensing of our extensive database of
descriptive information about television, movie, music and game content and
anti-piracy and content protection technologies and services.  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) CE manufacturers,
(ii) service providers (cable, satellite,telecommunications, mobile and internet
service providers among others), and (iii) other.The Company includes in service provider
revenues any revenue related to an IPG deployed by a service provider in a
subscriber household whether the ultimate payment for that IPG comes from the
service provider or from a technology supplier such as the manufacturer of a
set-top box.  IPG revenues for IPGs included in a set-top box deployed
by a service provider where payment was made by the set-top box manufacturer
were previously classified in CE manufacturers.  Revenue related to an
IPG deployed in a set-top box sold at retail is included in CE manufacturers.
The Company’s management feels this classification is preferable as it allows a
better association between service provider revenue and digital households
deploying a Company-provided IPG or an IPG deployed under a patent license with
the Company.CE
manufacturers deploy such Company products and services as Connected Platform,
TV Guide On Screen, Guide Plus+,G-GUIDE, VCR Plus+, web
services, G-Code, ShowView
System, LASSO and Tapestry. Service providers deploy such Company products and
servicesas Passport Echo, Passport DCT,
Passport, PassportApplications, i-Guide, j-Guide and web
services. Other includes
our entertainment company content protection products and services such as ACP,
RipGuard and BD+; AMG related web sites; and our business of licensing
our extensive database of descriptive information about television, movie, music
and game content.




On May 2,
2008, Macrovision Solutions Corporation acquired Gemstar-TV Guide International,
Inc. (“Gemstar”) and the Company’s results of operations include the operations
of Gemstar from that date forward.




On April 1, 2008, the
Company sold its software and games businesses (referred to as “Software” and
“Games”, respectively).  In November 2008, the Company sold its
RightCommerce (also know as “eMeta”) business.  In December 2008, the
Company sold its TV Guide Magazine business.  In January 2009, the
Company sold its TVG Network business and in February 2009, the Company sold its
TV Guide Network and TV Guide Online businesses.  Together TV Guide
Magazine, TVG Network, TV Guide Network and TV Guide Online are referred to as
the “Media Properties”.  The results of operations andcash flowsof Software, Games, eMeta and the Media
Properties have been classified as discontinued operations for all periods
presented (See Note 3 to the condensed consolidated financial
statements).








Results
of Operations




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




Three Months
      EndedMarch 31,2009
                                                                    
                                                                    2008
                                                                    
                                                                    Change $
                                                                    
                                                                    Change %Revenues:CE
      manufacturers
                                                                    $        46,486
                                                                    
                                                                    $        17,176
                                                                    
                                                                    29,310
                                                                    
                                                                    171%Service
      providers
                                                                    52,433
                                                                    
                                                                    1,645
                                                                    
                                                                    50,788
                                                                    
                                                                    3087%Other
                                                                    12,239
                                                                    
                                                                    11,474
                                                                    
                                                                    765
                                                                    
                                                                    7%Total
      revenues
                                                                    111,158
                                                                    
                                                                    30,295
                                                                    
                                                                    80,863
                                                                    
                                                                    267%Costs and
      expenses:Cost of
      revenues
                                                                    15,170
                                                                    
                                                                    3,933
                                                                    
                                                                    11,237
                                                                    
                                                                    286%Research and
      development
                                                                    23,024
                                                                    
                                                                    5,073
                                                                    
                                                                    17,951
                                                                    
                                                                    354%Selling, general and
      administrative
                                                                    32,131
                                                                    
                                                                    14,668
                                                                    
                                                                    17,463
                                                                    
                                                                    119%Depreciation
                                                                    4,549
                                                                    
                                                                    804
                                                                    
                                                                    3,745
                                                                    
                                                                    466%Amortization
                                                                    20,259
                                                                    
                                                                    3,065
                                                                    
                                                                    17,194
                                                                    
                                                                    561%Restructuring and
      asset impairment charges
                                                                    7,971
                                                                    
                                                                    -
                                                                    
                                                                    7,971
                                                                    
                                                                    NATotal operating
      expenses
                                                                    103,104
                                                                    
                                                                    27,543
                                                                    
                                                                    75,561
                                                                    
                                                                    274%Operating income from continuing
      operations
                                                                    8,054
                                                                    
                                                                    2,752
                                                                    
                                                                    5,302
                                                                    
                                                                    193%Interest
      expense
                                                                    (17,578)
                                                                    
                                                                    (4,018)
                                                                    
                                                                    (13,560)
                                                                    
                                                                    337%Interest income and other,
      net
                                                                    1,455
                                                                    
                                                                    5,606
                                                                    
                                                                    (4,151)
                                                                    
                                                                    -74%Gain on strategic
      investments
                                                                    -
                                                                    
                                                                    5,238
                                                                    
                                                                    (5,238)
                                                                    
                                                                    -100%(Loss) income from continuing
      operations before taxes
                                                                    (8,069)
                                                                    
                                                                    9,578
                                                                    
                                                                    (17,647)
                                                                    
                                                                    -184%Income tax (benefit)
      expense
                                                                    (2,724)
                                                                    
                                                                    2,156
                                                                    
                                                                    (4,880)
                                                                    
                                                                    -226%(Loss) income from continuing
      operations, net of tax
                                                                    (5,345)
                                                                    
                                                                    7,422
                                                                    
                                                                    (12,767)
                                                                    
                                                                    -172%Loss from discontinued operations,
      net of tax
                                                                    (36,170)
                                                                    
                                                                    (2,392)
                                                                    
                                                                    (33,778)
                                                                    
                                                                    1412%Net (loss)
      income
                                                                    $      (41,515)
                                                                    
                                                                    $          5,030
                                                                    
                                                                    (46,545)
                                                                    
                                                                    -925%






Net
Revenues




CE
Manufacturers




For the three
months ended March 31, 2009, revenue from the sale of our products and licensing
of our patents to CE manufacturers increased significantly compared to the same
period 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 patents contributed $28.1
million in revenues to the first quarter of 2009.  We expect revenue
from the licensing of our IPG products and patents to grow in the future
primarily driven by new license agreements and an increase in sales of CE
devices incorporating our products or patents.




Service
Providers




For the three
months ended March 31, 2009, revenue from the sale of our products to service
providers increased significantly compared to the same period 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 $52.0 million in revenues to the three
months ended March 31,






-
20 -


2009,
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
expand our licensing program internationally.




Other




Other
consists primarily of the licensing of our content protection technologies to
entertainment companies and the licensing of our underlying media
content/metadata.  For the three months ended March 31, 2009, Other
increased compared to the same period in the prior year primarily due to
increased revenue from our data business partially offset by a decline in our
content protection revenues from entertainment studios.





Cost of Revenues




For the three
months ended March 31, 2009, cost of revenues increased from the same period in
the prior year, primarily due to additional costs associated with products and
services acquired in the Gemstar acquisition.





Research
and Development




For the three
months ended March 31, 2009, research and development expenses increased from
the same period in the prior year primarily due to additional research and
development activities related to the Gemstar operations.





Selling,
General and Administrative




For the three
months ended March 31, 2009, selling, general and administrative expenses
increased from the same period in the prior year, primarily due to additional
costs associated with the Gemstar operations.





Depreciation
and amortization





Depreciation
and amortization increased from the same period in the prior year primarily due
to the depreciation of fixed assets and amortization of intangible assets from
the Gemstar acquisition.





Restructuring
and asset impairment charges




In
conjunction with the disposition of the Media Properties, the Company’s
management approved several actions resulting in a restructuring and asset
impairment charge of $8.4 million.  These charges included, $1.3
million in severance, a $2.9 million liability for the fair value of future
lease payments to be made on abandoned office space and $4.2 million in non–cash
asset impairment charges related to the abandoned office
space.  Additionally, during the three months ended March 31, 2009,
the Company reversed the remaining $0.4 million in liabilities related to the
Fiscal 2007 Restructuring Plans.  See Note 9 to the condensed
consolidated financial statements.





Interest Expense




Interest
expense increased compared to the same period in the prior year due to the
issuance of debt to finance the Gemstar acquisition.  The three months
ended March 31, 2009, also included $2.0 million in accelerated amortization of
note issuance costs related to the Company’s pay down of $240 million in
principal outstanding under its $550 million term loan in the first quarter of
2009.  See Note 4 to the condensed consolidated financial
statements.





Interest Income and Other,
Net






-
21 -




Interest
income and other, net decreased from the same period 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, the Company recognized a gain of $5.2 million on the sale
of its investment in Digimarc Corporation.





Income Taxes




We recorded
an income tax benefit from continuing operations of $2.7 million and income tax
expense of $2.2 million for the three months ended March 31, 2009 and 2008,
respectively. Income tax benefit for the three months ended March 31, 2009,
includes a discrete tax benefit of $1.9 million resulting from the enactment of
a California tax law change during the quarter which reduced the balance of
deferred tax liabilities expected to be paid in 2011 and years
thereafter.





Discontinued
Operations




Loss from
discontinued operations increased for the three months ended March 31, 2009, as
compared to the prior year, primarily due to income tax expense recorded due to
the sale of TVG Network, TV Guide Network and TV Guide Online.





Costs
and Expenses




Our cost of
revenues consists primarily of service costs, patent prosecution, patent
maintenance and patent litigation costs.  Our research and development
expenses are comprised primarily of employee compensation and benefits,
consulting costs, 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 LLC joint venture 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.





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, 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.




There have
been no significant changes in our critical accounting policies during the three
months ended March 31, 2009, as compared to those disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2008.






-
22 -





Liquidity
and Capital Resources




We finance
our operations primarily from cash generated by operations. Our continuing
operating activities provided net cash of $16.1 million and $4.9 million in the
three months ended March 31, 2009 and 2008, respectively.  Cash
provided by operating activities increased from the prior period primarily due
to the Gemstar acquisition.  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 our Annual Report on Form 10-K.




Net cash
provided by investing activities from continuing operations increased $91.0
million from the prior period, primarily due to current quarter receipts of
$244.6 million from the sales of TVG Network, TV Guide Network and TV Guide
Online, net of $36.8 million of cash classified as restricted (see below),
offset by a $153.4 million decrease in net investment proceeds. The Company also
made $2.4 million in capital expenditures during the quarter. We anticipate that capital expenditures
to support the growth of our business and strengthen our operations
infrastructure will be between $15 million and $20 million for the full year in
2009.


Net cash used
in financing activities from continuing operations increased $240.0 million from
the prior year period primarily due to the Company making $240.0 million in debt
payments, as required under the terms of its Term Loan (see below), from the net
proceeds from the TVG Network and TV Guide Network and TV Guide Online
sales.




Included on
the Company’s balance sheet at March 31, 2009 is $36.8 million in restricted
cash.  As part of the sale of TV Guide Network and TV Guide Online,
the Company agreed to deposit this cash in an escrow account to serve as a
source of recovery in the event the buyer of TV Guide Network and TV Guide
Online has an indemnifiable claim.  The cash remaining in the escrow
account will be released to the Company in May 2010.




In connection with
the Gemstar acquisitionthe
Companyentered intoand fully drew-downa $550 million five year
senior secured term loan credit facility (“Term Loan”). As ofMarch31, 2009, $307.2million was outstanding. The Term Loan
is guaranteed by Company domestic subsidiaries, and the assets and shares of
Company domestic subsidiaries are pledged as collateral against the Term Loan.
The Company is required to use the proceeds from asset sales of $75 million or
more to pay down the Term Loan; proceeds from assets sales of less than $75
million may be retained for investment in fixed or capital
assets.




The Company may elect
to pay intereston the Term
Loan at a rate of (i) Libor plus 3.75%, witha Libor floor of 3.5% or (ii) the Term
Loan administrative agent’s prime rateplus 2.75%.The Term Loan includes customary
covenants, including total leverage ratio limits, fixed charge coverage minimums
and restrictions on
additional debt incurrence
and dividend payments among others. As ofMarch31, 2009, the Company was in compliance with the
Term Loan debt covenants.




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 (see below) is still outstanding, and
(iii) the scheduled
maturity of such convertible notes is more than 181 days in the
future, then our Term Loan will become due on that 182nd day prior to
thematurity dateof such convertible notes.




In connection with
theGemstar acquisition the
Companyissued $100 million
of 11% senior notes (the“Senior Notes”) due 2013.
The Senior Notes include customary covenants, including fixed charge coverage
minimums and restrictions on acquisitions, additional debt
incurrence and dividend
payments among others. Interest is payable at 11% semiannually in arrears on
November 15 and May 15. Provided that the Term Loan has been repaid,
the Company may redeem some or all of the Senior Notes 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




-
23 -
 
 addition, provided that the Term Loan
has been repaid, the Company may redeem the Senior 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 Senior Notes if it experiences
specific kinds of changes of control or sells assets under certain
circumstances.




In August 2006,
the Company issued, in a private offering, $240.0 million in 2.625%
convertible senior notes due 2011 at par (the “Convertible
Notes”). The Convertible
Notes may be converted, under certain circumstances described below, based on an
initial conversion rate of 35.3571 shares of common stock per $1,000 principal
amount of notes (which represents an initial conversion price of approximately
$28.28 per share).




Prior to
June 15, 2011, holders may convert their Convertible Notes into cash and
the Company’s common stock, at the applicable conversion rate, under any of the
following circumstances: (i) during any fiscal quarter after the calendar
quarter ending September 30, 2006, if the last reported sale price of the
Company’s common stock for at least 20 trading days during the 30 consecutive
trading days ending on the last trading day of the immediately preceding
calendar quarter is greater than or equal to 120% of the applicable conversion
price in effect on the last trading day of the immediately preceding fiscal
quarter; (ii) during the five business-day period after any ten consecutive
trading-day period (the “measurement period”) in which the trading price per
note for each day of such measurement period was less than 98% of the product of
the last reported sale price of the Company’s common stock and the conversion
rate on each such day; or (iii) upon the occurrence of specified corporate
transactions, as defined in the indenture. From June 15, 2011 until the
close of business on the scheduled trading day immediately preceding the
maturity date of August 15, 2011, holders may convert their Convertible
Notes into cash and shares of the Company’s common stock, if any, at the
applicable conversion rate, at any time, regardless of the foregoing
circumstances.




Upon conversion, a
holder will receive the conversion value of the Convertible Notes converted
equal to the conversion rate multiplied by the volume weighted average price of
the Company’s common stock during a specified period following the conversion
date. The conversion value of each Convertible Note will be paid in:
(i) cash equal to the lesser of the principal amount of the Convertible
Note or the conversion value, as defined, and (ii) to the extent the
conversion value exceeds the principal amount of the Convertible Note, a
combination of common stock and cash. In addition, upon a fundamental change at
any time, as defined, the holders may require the Company to repurchase for cash
all or a portion of their Convertible Notes upon a “designated event” at a price
equal to 100% of the principal amount of the Convertible Notes being repurchased
plus accrued and unpaid interest, if any.




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. During the
fourth quarter of 2008 the Company repurchased 2.3 million shares of common
stock for approximately $25.1 million. These repurchases were recorded as
treasury stock and resulted in a reduction of stockholders’ equity. As of
March 31, 2009, treasury stock consisted of
2.3 million shares of common stock that had been repurchased, with a cost
basis of approximately $25.1 million.




As of March 31,
2009, we had $218.5 million in cash and cash equivalents, $85.4 million in
short-term investments, $80.5 million in long-term marketable securities
and $36.8 million in restricted cash.




As of
March 31, 2009, we held auction rate securities with a fair value of $71.3
million and par value of $79.5 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.




-
24 -
 
 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 auction rate securities acquired through UBS AG with a par value of $62.4
million. In December 2008, the Company entered into an agreement with UBS which provides
(i) the Company the
right to sell these auction rate securities back to UBS AG at par, at the
Company’s sole discretion, anytime during the period from June 30, 2010
through July 2, 2012,
and (ii) UBS AG the
right to purchase these auction rate securities or sell them on the Company’s
behalf at par anytime through July 2, 2012.




The Company
has made and will be making some significant payments in the second quarter of
2009.  On April 30, 2009, the Company acquired substantially all of
the assets of Muze, Inc. (“Muze”) for approximately $16.5 million in
cash.  On May 6, 2009, the Company voluntarily paid off an additional
$50 million on the Term Loan.  In addition, at March 31, 2009, the
Company had approximately $13 million in accrued liabilities for costs related
to the disposition of the Media Properties and working capital adjustments
related to the sales, which it expects to pay in the second quarter of
2009.  The Company also anticipates making income tax payments of
approximately $16 million in the second quarter of 2009.  While the
Company anticipates negative cash flow in the second quarter of 2009 related to
these payments, we believe thatour current cash, cash equivalents and
marketable securities and our annualcash flow 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):






-
25 -


Three Months
      EndedMarch
31,2009
                                  
                                  2008Net
revenue:Software
                                  
                                  
                                  
                                  
                                  $           -
                                  
                                  $      27,352Games
                                  
                                  
                                  
                                  
                                  -
                                  
                                  1,627eMeta
                                  
                                  
                                  
                                  
                                  -
                                  
                                  1,944TVG
      Network
                                  
                                  
                                  
                                  
                                  4,562
                                  
                                  -TV
      Guide Network/TV Guide Online
                                  
                                  
                                  
                                  
                                  18,363
                                  
                                  -Pre-tax (loss)
      incomeSoftware
                                  
                                  
                                  
                                  
                                  $           -
                                  
                                  $        1,369Games
                                  
                                  
                                  
                                  
                                  -
                                  
                                  (2,563)eMeta
                                  
                                  
                                  
                                  
                                  -
                                  
                                  (1,889)TVG
      Network
                                  
                                  
                                  
                                  
                                  (694)
                                  
                                  -TV
      Guide Network/TV Guide Online
                                  
                                  
                                  
                                  
                                  1,825
                                  
                                  -Pre-tax
      loss on disposal of TVG Network and TV Guide Network/TV Guide
      Online
                                  
                                  (3,468)
                                  
                                  -Income tax (expense)
      benefit
                                  
                                  
                                  
                                  
                                  (33,833)
                                  
                                  691Loss from discontinued operations,
      net of tax
                                  
                                  
                                  
                                  
                                  $   (36,170)
                                  
                                  $       (2,392)
  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.  The sale of our Software business closed on April 1,
2008.




Our Games
business focused on providing tools and services needed to facilitate the
digital distribution of providers of digital goods.  The sale of our
Games business closed on April 1, 2008.




eMeta provided
software solutions that enable companies to manage and sell digital goods and services
online.The sale
of eMeta closed in November 2008.




TV GuideMagazine’s weeklypublication wascentered on TV-related news, feature
stories, TV celebrity photos, behind-the-scenes coverage, reviews and
recommendations and national television listings.The sale of TV Guide Magazine closed in
December 2008.




TVG Network generated
revenue primarily from wagering and licensing fees.The sale of TVG Network closed in
January 2009.




TV Guide Network /TV Guide Online generated
revenue primarily from advertising and carriage fees. The sale ofourTV GuideNetwork /TV Guide Onlineclosed in February2009.




Impact of
Recently Issued Accounting Standards




See Notes 4
and 12 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.








- 26-
-


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 $375.6 million as of March 31,
2009.  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 March 31,
2009, the fair value of our auction rate securities portfolio totaled
approximately $71.3 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.




Included in the above
are auction rate securities acquired through UBS AG with a par value of $62.4
million. In December 2008, the Company entered into an agreement with UBS which provides
(i) the Company the
right to sell these auction rate securities back to UBS AG at par, at the
Company’s sole discretion, anytime during the period from June 30,
2010 through July 2,
2012, and (ii) UBS AG
the right to purchase these auction rate securities or sell them on the
Company’s behalf at par anytime through July 2, 2012.




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 $0.2 million decrease in the fair
value of our fixed income available-for-sale securities as of March 31,
2009.




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,
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




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27 -
 
 our
subsidiaries operate in their local currency, which mitigates a portion urof 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 Secured Term
Loan.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.




Senior
Notes.On May 2, 2008, in connection with its acquisition of
Gemstar, the Company issued $100.0 million 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.    During the
quarter ended March 31, 2009, there have been no changes in our internal control
over financial reporting that have materially affected, or are reasonably likely
to materially affect, these controls.




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28 -


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.





Indemnifications




In April 2005,
Gemstar received a notice of a potential claim for indemnification from 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, whichsubsequently 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 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.





Gemstar Acquisition
Litigation




Martin Henkel v.
Battista, et al.in the
Court of Chancery of the State ofDelaware.  On December 16,
2008, the court issued an order approving the settlement between the
parties.  During the quarter-ended March 31, 2009, as part of the
settlement, the Company paid $1.1 million toward plaintiffs’ legal fees and the
Company’s insurance carrier reimbursed the Company for $0.8 million of that
amount.  The settlement is now final and the class members have received
notification of the settlement.





Other
Litigation




Thomson, Inc. v.
Gemstar—TV Guide
International, Inc., in the
Superior Court of the State ofIndianafor theCountyofHamilton. On May23, 2008, Thomson, Inc. (“Thomson”) initiated this action, seeking, among other
things, indemnification from the Company in connection with its settlement of the patent claims
against it inSuperGuide
Corporation v. DirecTV Enterprises, Inc., et al., in the United States District Court
for the Western District of
North Carolina. Thomson alleges that it entered into multiple agreements
with the Company between 1996 and 2003 that would require the Company to
indemnify Thomson in theSuperGuidelitigation. Specifically, Thomson asserts causes of actionfor
fraud/fraudulent




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29 -
 
 inducement, breach of contract, breach
of implied in fact indemnity and warranty of title against infringement, and
unjust enrichment. Thomson seeks a declaration from the Court that the
Company owes Thomson defense and indemnity forSuperGuide’s claims, compensatory damages,
including fees and expenses paid by Thomson in that case, 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.  The case
is set for trial in June 2009.




DIRECTV, Inc. v.
Gemstar-TV Guide Interactive, Inc., American Arbitration Association -
Los Angeles.  On March 20, 2009, DIRECTV, Inc. (“DIRECTV”) filed this
arbitration demand seeking indemnity for payments made in settlement of two
patent infringement lawsuits, including the SuperGuide Corporation v. DirecTV
Enterprises, Inc., et al.matter.  DIRECTV seeks
indemnity under the November 21, 2003 License and Distribution Agreement and
Patent License Agreement between the parties and claims damages plus interest
and its arbitration-related attorneys’ fees.  We have filed a Response
and Counterclaim for breach of contract.   No hearing date has
been set.




In addition to the
items listed above,MacrovisionSolutions Corporation is party to
various legal actions, claims and proceedings as well as other actions, claims
and proceedings incidental to its business.MacrovisionSolutions Corporation has established
loss provisions only for matters in which losses are probable and can be
reasonably estimated. Some of the matters pending againstMacrovisionSolutions 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 Annual Report on Form 10-K for the period
ended December 31, 2008 and is incorporated herein by
reference.  There have been no material changes in our risk factors
since the filing of our last Annual Report.





Item 2.  UnregisteredSales of Equity
Securities and Use of Proceeds





None.





Item 3.  DefaultsUpon Senior
Securities.





None.


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





None.





Item 5.  OtherInformation





None.




-
30 -




Item 6. Exhibits





Incorporated
      by ReferenceExhibit
      Number
                      
                      Exhibit
      Description
                      
                      Form
                      
                      Date
                      
                      Number
                      
                      Filed
      Herewith10.1
                      
                      Equity Purchase Agreement dated
      January 5, 2009, by and among Gemstar-TV Guide International, Inc., TV
      Guide Entertainment Group, Inc., UV Corporation, and Lions Gate
      Entertainment, Inc.
                      
                      8-K
                      
                      1/9/2009
                      
                      10.110.2
                      
                      2009 Senior Executive Company
      Incentive Plan
                      
                      8-K/A
                      
                      2/11/2009
                      
                      10.131.01
                      
                      Certificationof the Chief ExecutiveOfficer 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.
                      
                      
                      
                      
                      
                      
                      
                      X.
                      
                      
                      
                      
                      
                      
                      
                      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
2002X32.02
                      
                      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.





- 31
-


SIGNATURES







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







Macrovision
Solutions Corporation


Authorized
Officer:




Date: 
      May 6, 2009
              By:
              /s/ Alfred
      J. AmorosoAlfred
      J. AmorosoChief
      Executive Officer






Principal
Financial Officer:


Date:
      May 6, 2009
            By:
            /s/ 
      James BudgeJames
      BudgeChief
      Financial Officer






Principal
Accounting Officer:





Date:
      May 6, 2009
            By:
            /s/ 
      Peter C. HaltPeter
      C. HaltChief
      Accounting Officer