Liberate slumps on downgrade

Liberate Technologies slumped 12 percent Monday after an analyst downgraded the company and said delays in deploying interactive TV will fall hardest on the set-top box software maker.

Liberate (Nasdaq: LBRT) shares were down $1.66 to $12.66, far below its 52-week high of $119.88.

Deutsche Banc Alex Brown analyst Peter Ausnit downgraded Liberate Technologies (Nasdaq: LBRT) to "market perform" from "buy" Monday, and said competitor OpenTV (Nasdaq: OPTV), up $0.38 to $17.88 Monday, has better software for existing set-top boxes.

The analyst didn't change his estimates, since the company's deferred revenue, international business and limited U.S. trials should generate enough revenue to meet targets. However, he added that he does not expect near-term catalysts and said the company isn't expected to reach profitability until 2002-2003. The company is expected to lose 12 cents a share in its upcoming third quarter, according to First Call Corp.

U.S. cable deployment of interactive TV now looks unlikely in 2001, and the delay will hurt Liberate more than other interactive TV companies, Ausnit said in a research note.

Most cable TV operators plan to deploy video on demand and interactive program guides during 2001. While these are interactive applications, they don't need the kind of software Liberate provides.

Ausnit also said Liberate looks bad compared to competitor Open TV, which is expected to reach profitability during calendar 2001. Excluding cash, Liberate trades at 12 times Ausnit's $81.5 million calendar 2002 revenue estimate, a 100 percent premium to OpenTV.

Ausnit rates OpenTV a "buy" and said moves from EchoStar (Nasdaq: DISH) and others could prove catalysts for the company. EchoStar is the only major U.S. video provider that plans to offer advanced interactive services in volume during 2001, and it will use OpenTV's software. USA Media also plans to launch a set-top box within the next two months that may push larger cable operators to adopt OpenTV's technology.

Six analysts continue to rate Liberate a "strong buy," and six others a "moderate buy" according to Zach's Investment Research.