Comcast Boosts SeaChange Revenues
The main reason for the unexpected results, including the profit, was the firm's $9.9 million in revenues generated by various middleware contracts and, importantly, software development for long-time major customer cable giant Comcast Corp. (Nasdaq: CMCSA, CMCSK), which has also safeguarded its reliance on the vendor's technology with an acquisition clause as part of a new contract -- more on that in a moment.
In total, SeaChange reported revenues of $45.4 million in the three months to July 31, its highest-ever quarterly total and a 73 percent increase compared with a year earlier (though it's worth noting what a stinker that year-ago quarter was -- see SeaChange Records Q2 Loss).
SeaChange also managed to creep into the black in its second quarter of fiscal 2007, recording net income of $600,000, or 2 cents per share. Analysts had been expecting a loss of 8 cents from revenues of around $37 million.
The software development revenues from Comcast are part of a two-year contract sealed with the cable operator on July 31 that is worth at least $45 million up to December 31, 2007.
In a Securities and Exchange Commission (SEC) filing dated August 2, SeaChange reported a Master Purchase License and Services Agreement for a minimum $30 million worth of business in 2006, including products and services already acquired since January 1 and a further $15 million in 2007 related to maintenance and software subscription services. Any purchase of hardware and software products in 2007 would be incremental to the agreement.
Up to April 30, Comcast had spent $8.7 million with SeaChange, leaving at least a further $21.3 for the rest of this year.
Comcast also has the option to extend the deal for two further one-year periods.
The cable operator has also accounted for the ongoing vendor consolidation process by including a clause in the agreement that gives it "a right of first offer" to buy SeaChange's VOD business, should the company decide to sell that business or its VOD assets. Should SeaChange be acquired outright, the new owner would be "required to provide Comcast a worldwide, perpetual license to the Company’s Video-On-Demand software included in the Agreement."
The cable video sector has seen a number of significant acquisitions in the past few months, and more are expected. (See Moto Buys VOD Vendor Broadbus, Cisco Snatches VOD Vendor Arroyo, Harmonic Spends $45M on Entone VOD-Ware, and Riding the Cable Consolidation Wave .)
The Comcast deal, plus a bullish outlook on the general strength of its software and applications business and expansion in the telecom carrier sector and overseas markets, means SeaChange believes the second half of its financial year will generate slightly higher revenues than the first half's $78.6 million. That would give it annual revenues of more than $157 million, higher than the $150 million expected by analysts.
— Ray Le Maistre, International News Editor, Light Reading