Rovi is claiming a $2.4 billion loss on the divestiture of TV Guide Magazine to a venture-capital firm for one dollar in December 2008 -- which the company expects to yield a sizable tax deduction in the current quarter.
The company, formerly called Macrovision Solutions, closed its $2.8 billion acquisition of Gemstar-TV Guide International in May 2008. Subsequently, Rovi sold the money-losing magazine to venture-capital firm OpenGate Capital for $1 and loaned the firm $9.5 million to run it.
On Tuesday, Rovi announced that the Internal Revenue Service confirmed that the company would recognize an ordinary tax loss of approximately $2.4 billion from the TV Guide Magazine sale. As such, Rovi anticipates recognizing "a significant tax benefit" in its first quarter 2010 GAAP financial statements, which will be net of any required valuation allowance.
Rovi said it is currently evaluating what valuation allowance would be appropriate. The total federal income tax cash benefit that could be realized from the $2.4 billion tax loss is approximately $836 million under current tax rules. The tax loss will carry forward for up to 20 years, from 2008, to offset future taxable business profits.
In a separate deal, Rovi in 2009 sold TV Guide Network -- which is distributed to more than 80 million homes -- along with the TVGuide.com site to Lionsgate and One Equity Partners, the private equity arm of JPMorgan Chase.
Santa Clara, Calif.-based Rovi primarily sells content security, metadata products and interactive program guides to operators and consumer-electronics companies. Last week Rovi said it was exiting the GuideWorks IPG joint venture with Comcast to "realign our portfolio and investments towards solutions we have direct control over," according to CEO Fred Amoroso.
