Goldman Sachs Comments On Rovi 1Q11 Earnings

According to Goldman Sachs, Rovi ROVI reported 1Q2011 revenue and earnings below its and consensus ests as it over-estimated the impact from the Sonic Solutions acquisition, which was completed mid-quarter. Goldman Sachs said that Rovi maintained full year revenue guidance as improving trends and customer wins were offset by the risk of demand and supply in Japan softening. “However, the company raised 2011 EPS guidance by $0.05 to $2.25-$2.55, and implied that it expected to end the year near the high-end of EPS guidance on cost reductions. Rovi reported revenue, EBITDA, and EPS of $162 mn (+24% yoy), $69 mn (+13%), and $0.48 (+6%) versus our $187 mn, $80 mn, and $0.53 estimates (in-line with consensus). Gross margin of 84.8% was 30 bp above our estimate, while EBITDA margin of 42.8% was generally in-line and down over 400 bp yoy, hurt by Sonic Solutions. We leave our 2011-2013 revenue generally unchanged as solid trends and customer wins are offset by Japan softness. On the back of 1Q results, our new 2011E- 2013 EPS are $2.52/$2.93/$3.62 (from $2.41/$2.92/3.61 previously).” Rovi closed yesterday at $49.68.