Fourth-quarter earnings from Macrovision (Nasdaq: MVSN) are forthcoming (Thursday night, to be precise). Go forth and explore the third quarter and what a recent acquisition might mean; then get back here, forthwith, and get funky with fresh Foolish forecasting.

What Fools say:
Here's how Macrovision's CAPS score rates against some of its peers and competitors:

Market Cap (millions)

Trailing P/E Ratio

CAPS Rating

Microsoft (Nasdaq: MSFT)

$303,408

18.6

***

Adobe Systems (Nasdaq: ADBE)

$19,726

28.7

****

Dolby Laboratories (NYSE: DLB)

$4,739

32.7

*****

Macrovision

$893

23.0

****

RealNetworks (Nasdaq: RNWK)

$847

11.9

**

Data taken from Motley Fool CAPS on 02/18/2008.

"As long as content providers want to get compensated for making their products available, rights management will be an on-going concern," says one bullish CAPS player. "MVSN is at the forefront of solutions for all of the various digital distribution routes. As these channels develop, MVSN's profits will increase."

But a recent bearish commentator explains that "From an end-user's perspective, DRM is an anti-feature. Customers will reject DRM in the long run." That's not even a new or unusual sentiment. Hold that thought.

What management does:
Not much to complain about here: Net margins are on an upward trajectory, on steadily growing sales. Free cash flow is dependably larger than the GAAP bottom line. It's all good stuff.

Margins

6/2006

9/2006

12/2006

3/2007

6/2007

9/2007

Gross

85.4%

84.1%

82.9%

82%

81.7%

83.2%

Operating

16%

14.4%

13.8%

13%

12.1%

17.7%

Net

8.9%

8.9%

13.3%

14.2%

12.6%

14.2%

FCF/Revenue

26.9%

28.8%

30.6%

30.6%

29.9%

28.5%

Y-O-Y Growth

6/2006

9/2006

12/2006

3/2007

6/2007

9/2007

Revenue

9.2%

16.2%

21.8%

22.4%

14.2%

16.5%

Earnings

(30.8%)

(37.4%)

49.4%

89.7%

61.4%

85.8%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
So now, let me launch into the bad stuff.

Macrovision's core competency lies in digital rights management (DRM technology), which I think is a temporarily necessary evil. Entertainment producers are clinging to that crutch for now, but they must kill it before moving on to the next stage in the industry's development: scads of consumer-centric choice.

In the short term, however, DRM solutions will probably serve Macrovision well. And the company seems to be gearing up for a wholesale business shift by shooting tendrils into related sectors like information management and software installation solutions. If and when the likes of Disney (NYSE: DIS) and Time Warner (NYSE: TWX) see the light and let consumer-level DRM die, Macrovision might still have a future, thanks to some shrewd management moves and a strong balance sheet.

Here's what I'd do. Wait for the first couple of studios to announce that DRM is going the way of the dodo, watch Macrovision's stock drop to infinitesimal levels, then do your checks to see whether there's any meat left on these bones. Until then, though, this Fool is staying away.

Dolby, Disney, and Time Warner are all Motley Fool Stock Advisor recommendations. Microsoft is a Motley Fool Inside Value pick. Get up to speed with a couple of free 30-day trial subscriptions. Or just sign up for a free CAPS account to find the identities of your fellow Fools who were quoted above. They might have more to tell you!

Fool contributor Anders Bylund is a Disney shareholder, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.