Focus Media, $FMCN, Defends Itself Against Muddy Waters; Stock Down 6%

“Focus Media maintains both an LCD display network and a poster frame network, among its several lines of business. The co’s LCD display network refers to its network of display devices placed in high-traffic areas of commercial and public buildings under the brand name Focus Media. As of September 30, 2011, the 178,382 display devices in the LCD display network included: 116,026 LCD screens, 32,478 LCD 2.0 digital picture screens and 29,878 LCD 1.0 picture frame devices. Both the LCD screens and LCD 2.0 digital picture screens have the technical capacity to show video images as well as dynamic and static images, whereas the 1.0 picture frame devices that are part of the LCD display network only display traditional fixed images. The Company’s poster frame network, which is distinct from its LCD display network, consists of traditional and digital advertising poster frames placed mainly in the elevators and public areas of residential complexes which it markets under the brand name Framedia. The LCD 2.0 digital picture screens included in the co’s LCD display network device count are distinctly different from the digital and traditional frames included in the Company’s poster frame network device count. The LCD 1.0 picture frame devices are included in the Company’s LCD display network device count because, when the Company developed its LCD display network in Tianjin, Kunming and Shijiazhuang, it encountered difficulties in installing LCD screens or LCD 2.0 digital screens due to a lack of adequate power sources or other technical limitations, and therefore opted to use some traditional picture frame devices in these areas. The numbers of displays disclosed by the Company in the past have been completely accurate, but did not provide this granular breakdown.”