SeaChange Shares Slip on Q1
SeaChange posted first quarter revenues of $38.8 million, up 17 percent from a year ago, and narrowed its net loss to $3.7 million (12 cents per share), versus $4.4 million (15 cents per share).
Friedman Billings Ramsey & Co. Inc. (FBR) said it expected SeaChange to pull down $42 million, but the company missed the mark in part because traditional VOD systems revenues dropped 54 percent quarter-over-quarter to $5 million. SeaChange's Broadband segment, which includes VOD and ad insertion hardware and software, generated $19 million in revenues, up 17 percent year-over-year.
Buoyed by a renewed development contract with Comcast Corp. (Nasdaq: CMCSA, CMCSK) valued at $6.4 million, however, the company's software revenues came in stronger, doubling to $9 million versus the previous quarter.
FBR analyst Brian Coyne reiterated a "market perform" rating on the stock, and a price target of $8 per share.
The software deal with Comcast, "while likely to be small on its own, could help offset the weakening hardware business if replicated across several large customers," Coyne said, in a research note issued Thursday.
Speaking Wednesday afternoon during the earnings call, SeaChange President & CEO Bill Styslinger conceded that reaching earlier fiscal second quarter revenue guidance of roughly $44 million "is possible, but unlikely at this stage of the quarter."
"While we continue to see positive developments from a VOD software perspective... we are currently forecasting no substantial improvement in VOD systems revenue in the second quarter from the level in the first quarter. This is a by-product of several of our large customers, deferring VOD system upgrade plans to the second half of this year, compared to previously forecasted first half," Styslinger said.
He also acknowledged that the lumpy video server market is changing with the introduction of Flash-based storage and new and larger competitors entering the sector. SeaChange fleshed out some details for its own Flash-based server in April. (See Sun Intros IPTV Platform and A Flashy Approach to VOD.)
Although SeaChange believes its new entry -- the MediaServer Flash Streamer -- will become a "powerful add-on" for the company's installed base and for new accounts, "it's not really expected to make a big impact this year," Styslinger acknowledged.
"These larger competitors entering the market validate video-on-demand and reinforce the point we have been making that this market will experience substantial growth in the coming years," he said, noting that SeaChange is now capable of marketing and selling its VOD software and hardware separately -- a move already made or about to be made by sector rivals such as C-COR Corp. (Nasdaq: CCBL) and Concurrent Computer Corp. (Nasdaq: CCUR) (See Concurrent Opens Its Back Office .)
Styslinger reiterated that Comcast was the first MSO to sign up for SeaChange's software subscription model. Since then, another eight yet-unnamed customers have taken that option, as well.
SeaChange, he added, is in "active discussions" with four large North American service operators pertaining to VOD master purchase agreements. Those deals include software subscription services and provisions for purchasing video servers, related services, and maintenance. Styslinger declined to name the service providers in question, however.
— Jeff Baumgartner, Site Editor, Cable Digital News