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SeaChange Software Strategy Surges

Jeff Baumgartner
5/30/2008

SeaChange International Inc. (Nasdaq: SEAC) shares jumped more than 8 percent mid-Friday after the company posted first quarter of revenues of $45.4 million, up 17 percent year-over-year, and bested Wall Street's expectations of $43.6 million. Net income was $343,000, versus a year-ago net loss of $4.5 million. (See SeaChange Posts Q1.)

SeaChange attributed the revenue rise to additional deployments of its Axiom software with Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Cox Communications Inc. . Cox, which is also using SeaChange technology to fuel video products targeted to the hospitality/hotel market, has all but standardized its VOD deployments on the vendor's backoffice platform, and hooked it to servers from third-party vendors such as Concurrent Computer Corp. (Nasdaq: CCUR). (See Cox Closes VOD Gap .)

SeaChange is also benefiting from a master purchase and licensing agreement with Comcast, and looks to factor heavily into "Project Infinity," an MSO initiative that will offer 1,000 hi-def "choices" by year-end. Next year, the MSO has plans to offer about 6,000 video-on-demand titles, with more than half in HD format. (See Comcast Launches 'Project Infinity'.)

Comcast's plans to shift HD-VOD into high gear will expand the MSO's storage needs. A single stream of HD takes three to four times the storage of a standard-def stream, SeaChange CEO Bill Styslinger said Thursday afternoon during the company's earnings call. SeaChange declined to make any firm revenue projections based on that, "but it's obviously a very favorable trend for the [storage] sales," Styslinger added. "High definition this year is a very strong driver of software and hardware revenues for us."

Comcast has also has expressed interest in launching a "Start Over" service in 2009, a move that synchs up up with some recent software product plans SeaChange announced just prior to The Cable Show in New Orleans. (See Comcast Feels Like Starting Over and SeaChange to Restart & Personalize VOD .)

Comcast and Virgin Media Inc. (Nasdaq: VMED) were SeaChange's 10 percent or greater customers for the vendor's fiscal first quarter.

Divide and conquer
Tying in with a decision about two years ago to decouple its video-on-demand server hardware and backoffice software products, SeaChange has also moved ahead with a plan to separate itself into three operating segments: Software (VOD and broadcast software, advertising systems, and set-top middleware); Servers and Storage (VOD and broadcast server products); and Media Services, which includes the activities of its U.K.-based On Demand Group (ODG) subsidiary. Those segments replace SeaChange's previous divisions of Broadband, Broadcast, and Services.

The decision to separate the hardware and software ends of the business appears to be paying off, as roughly two thirds of SeaChange's first quarter revenues were derived from the software side of the house.

"On an absolute dollar basis, it [software] is our most profitable business," Styslinger said.

— Jeff Baumgartner, Site Editor, Cable Digital News

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