1. The current cash balance of almost $100 million far exceeds the amount necessary to run the business.
2. The current level of cash is well outside the bounds of normal business practices for comparable firms.
3. Retaining cash for potential acquisitions threatens to distract management, introduce risk and dilute shareholder value.
4. The share repurchase will greatly enhance value for all shareholders.

We believe OpenTV will generate over $10 million in free cash flow in 2008, net of capital expenditures, up from $7 million in 2007.  Since Kudelski SA acquired a controlling stake in early 2007, management has expressed its commitment to improve profitability and appears to be making progress. Thus, we expect operating cash flow to remain positive.  We think it is reasonable for OpenTV to maintain $25 million of cash (approximately three months’ sales) to demonstrate financial stability to customers and weather extraordinary business pressures.  Retaining cash considerably beyond that amount appears to contradict management’s confidence in the business.

OpenTV’s cash has nearly doubled from $52 million to $99 million over the four years ended September 30, 2008.  Compared to over 1100 comparable U.S. public companies (based on market capitalizations of $50-500 million and revenues of over $50 million), OpenTV’s ratio of cash-to-revenue ranks in the top decile, which we believe indicates lax balance sheet management.  We believe this proposal is a start toward better stewardship of shareholder resources

A critical element of OpenTV’s improving performance is the recent divestiture of several non-core businesses amassed through acquisitions.  We fear that excessive idle cash could encourage new acquisitions that would reintroduce management distractions and unknown risks.  We are also concerned that acquisitions might be pursued to meet the global business objectives of Kudelski rather than for the financial benefit of all shareholders.  Further, we expect any acquisitions to be highly dilutive to shareholders because there are few companies OPTV can acquire for less than its current valuation of only 0.6x revenue and 5.2x EBITDA, based on our projected 2008 results for OpenTV and its 3-month average stock price of $1.21 as of December 17, 2008

We believe a partial return of excess capital to shareholders is a smart financial move. The Dutch Auction share repurchase method will provide an orderly mechanism for shareholders seeking liquidity, while greatly improving the potential return on equity for shareholders who choose to retain some or all of their OpenTV shares. After the repurchase, the business will still be well funded with approximately $70 million of remaining cash.