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Video services

SeaChange Flashes Server Growth

SeaChange International Inc. (Nasdaq: SEAC)'s decision to incorporate Flash into its video servers is starting to pay off based on what the vendor had to say about its fiscal fourth-quarter results.

Revenues from the company's Servers and Storage division hit $17.7 million, up 49 percent year-over-year. SeaChange attributed the jump to increased shipments of video-on-demand (VoD) servers, particularly from its newer Flash memory servers, to three of its largest North American cable MSO customers, and to some recent traction in Russia.

SeaChange declined to list them out, but Comcast Corp. (Nasdaq: CMCSA, CMCSK) was one of the vendor's two 10 percent customers in the period. The other was Virgin Media Inc. (Nasdaq: VMED). Cox Communications Inc. is another significant SeaChange customer, but that MSO has standardized on SeaChange's "Axiom" backoffice software and Concurrent Computer Corp. (Nasdaq: CCUR) servers. (See Cox VOD Effort Matches Vendor Rivals .)

"We have now approximately 10,000 Flash drives in the field, and they are exceeding our expectations for reliability," SeaChange CEO, president, and chairman Bill Stylinger said on Thursday's earnings call.

SeaChange booted up its Flash strategy last year, introducing a technology known for its durability, power cost savings, and streaming capacity. Cablevision Mexico was the first MSO to deploy it. (See A Flashy Approach to VOD and Cablevision Mexico Gets Flash With VOD.)

And many of its rivals have followed suit. Concurrent has launched a Flash server. Arris Group Inc. (Nasdaq: ARRS) took the partnership route, inking a reseller deal with Verivue Inc. , a startup that has built a media switching and storage platform based entirely on Flash. Sweden's Edgeware AB , meanwhile, was the first to introduce a Flash-centric platform. (See Concurrent Bows Flash Gear, Edgeware Brings Flash to VOD, Verivue Surfaces With Comcast Backing , and Arris Pumps Up Video With Dolce's Verivue .)

SeaChange is trying to take it a step further using a content delivery network (CDN) software strategy that moves content closer to the network edge based on its popularity; prepares content for display on TVs, PCs, and other devices; brings in video from operators' VoD networks as well as "non-managed" Internet-sourced content; and inserts ads on the fly to protect traditional TV business models. You know, the kind of stuff Comcast and Time Warner Cable Inc. (NYSE: TWC) are pursuing. (See Cable-Led Web TV Deals Still Forming.)

"Cable and telephone companies are actively becoming CDN vendors themselves, and we're playing a major role in that," said SeaChange chief strategy officer Yvette Kanouff.

Financial update
SeaChange's software segment posted fourth-quarter revenues of $32 million, up 4 percent. Net income was $4.8 million, down from $12 million in the year-ago quarter, which included $10 million from the sale of SeaChange's stake in FilmFlex, a VoD content aggregator, to Walt Disney Co. (NYSE: DIS) and Columbia Pictures Corp. (See SeaChange Posts Q4 and SeaChange Sheds FilmFlex Stake.)

Total revenues for fiscal 2009 were $201.8 million, up 12 percent from fiscal 2008, while net income reached $10 million (32 cents per share), versus $2.9 million (10 cents per share).

But, echoing what other vendors have been saying lately, Styslinger said customer capital spending plans for fiscal 2010 remain "cloudy," despite the fact that Comcast did renew its hardware and software purchase agreement with SeaChange for another two years.

"We are cautiously optimistic that we will see second-half top-line growth compared to the first half, leading to top-line growth for the year," he said. "We see continued expansion of VoD during these tough economic times. People are more likely to look for entertainment at home."

— Jeff Baumgartner, Site Editor, Cable Digital News

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