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Lionsgate Earnings Roar, Help in Battle with Icahn

Published: Tuesday, 11 Aug 2009 | 12:14 PM ET

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By: Julia Boorstin
Correspondent

Lionsgate wowed Wall Street with higher fiscal first quarter results than the same quarter last year that easily beat Wall Street Estimates.

In an earnings call this morning the company laid out how its independent studio with strong, distinctive brands and a burgeoning television business is really clicking, despite the fact that the company's market cap is pretty much flat with where it was when the company went public five years ago.

CNBC.com

Since its IPO Lionsgate [LGF Loading... () ] transformed from a niche Indie studio to the force behind major franchises like the "Saw" horror films and successful cross-platform brands like Tyler Perry. It's also grown a hugely successful television business, producing hits like Mad Men (AMC) and Weeds (Showtime) which are sure to have a long life in syndication.

Lionsgate stock rose 13 percent in after-hours trading and continued to rise Tuesday on the hells of the earnings call. Fiscal first quarter revenue rose 30 percent from the same quarter last year to to $388 while net income grew to 30 cents per share up from 3 cents last year.

The jump was largely thanks to a 112 percent jump in TV production revenue and higher revenue from Mandate, which Lionsgate bought in 2007 — the division's "Drag me to Hell" movie and "Juno" DVD sales outperformed.

Another factor this quarter is the acquisition of the TV Guide Network and TVGuide.com which contributed $27.9 million.

These stronger numbers helped overcompensate for the fact that the studio released only one movie this year compared to two last year and these strong numbers should be the best possible defense against corporate raider Carol Icahn, who now owns nearly 17 percent of the studio.

Icahn thought the company was undervalued, now let's see if the Street takes into consideration the company's advantages that CEO Jon Feltheimer pointed out on the earnings call.

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The company has much lower overhead, and thus lower hurdle to profitability, than the studio giants. They don't have a separate division for specialty films, they use the same team that markets "Crash" to market "Saw" sequels and their Indie documentaries. And while many of their larger rivals, including Universal [GE Loading... () ] and 20th Century Fox [NWS Loading... () ] are facing off against Redbox [CSTR Loading... () ], Lionsgate has made a deal with the DVD rental kiosk company to prevent the resale of used DVDs.

Instead of spending millions on legal fees, Lionsgate says this is a smart opportunity for Lionsgate in generating additional rental revenue. Lionsgate a partner in the new pay cable channel Epix, along with Paramount [VIA Loading... () ] and MGM. While the network has only minimal distribution nailed down ahead of its scheduled October release, Feltheimer reassures that discussions are "heating up" and the relationship with Epix will allow the studio flexibility to best monetize new windows as they emerge.