SeaChange Softens Up, Cuts Staff

SeaChange International Inc. (Nasdaq: SEAC) announced a string of significant changes as it reported fourth-quarter numbers Thursday, including new presidential appointments and some layoffs linked to a decision to spawn a software-focused business unit. (See SeaChange Posts Q4, Names New Prez.)

Among the personnel changes, SeaChange president and COO Ed Dunbar has swung out of the exit door, while Yvette Kanouff, most recently the company's chief strategy officer, has been promoted to president. She'll run SeaChange's overall product strategy, business development, product, management, and communications and investor relations functions.

SeaChange also promoted Erwin van Dommelen to president of software. He joined SeaChange last year by way of its $36.5 million acquisition of Dutch video software company eventIS Group B.V., where he had served as president. (See SeaChange Goes Dutch for VoD Smarts.)

"The future of our company is software-centric," SeaChange chairman and CEO Bill Styslinger declared on Thursday afternoon's earnings call.

SeaChange has been slowly evolving in that direction, starting with a decision about five years ago to separate its video-on-demand (VoD) backoffice systems from the video servers. It later expanded into set-top and mobile device software through subsequent purchases of Liberate Technologies' European business and Mobix Interactive. (See SeaChange Software Strategy Surges , SeaChange Buys Liberate European Unit , and SeaChange Reports Q3, Buys Mobix.)

SeaChange's software strategy went even deeper into the device domain in January via its acquisition of VividLogic Inc., a maker of set-top and consumer electronics gear software. VividLogic, which markets its own tru2way middleware stack, counts Pace plc , Funai Electric Co. Ltd. (OTC: FUAIY), Panasonic Corp. (NYSE: PC), Cisco Systems Inc. (Nasdaq: CSCO), and Mitsubishi Corp. as customers. (See SeaChange Snags VividLogic for $12M.)

Kanouff said SeaChange's more centralized software service and product strategy is coming into focus as its operator customers rapidly pursue ways to complement their traditional video-on-demand (VoD) offerings and advertising services with various cross-platform, "TV Everywhere," and over-the-top content distribution strategies.

"We need the same platform to support all of the new things that are coming up," she told Light Reading Cable. "It's the cable operators... that have the best opportunity to benefit from that growth."

SeaChange anticipates that this "realignment" and creation of a discrete software business unit will cut R&D costs, but the elimination of duplications and overlaps will result in layoffs that will account for $1.5 million to $1.8 million in severance charges during SeaChange's first quarter.

SeaChange CFO Kevin Bisson noted on the earnings call that 60 percent of the job cuts are hitting SeaChange's software business, with the remainder split between its service and storage business and corporate general and administration functions. Kanouff confirmed Friday the layoffs will affect about 3 percent to 4 percent of the company's employee base (around 35 to 50 staff, according to Light Reading Cable's calculations).

Although the software group will be a big focus for SeaChange, it still runs a servers and storage unit (for content distribution networks, dense storage, and flash streamers), and a media services group led by On Demand Group (ODG), a content aggregation subsidiary based in London.

Earnings update
SeaChange posted fourth-quarter revenues of $53 million, down $1 million year-on-year, and broke even after notching net income of $4.8 million (15 cents per diluted share) in the year-ago quarter.

Its software unit brought in $34.9 million, up 9 percent, thanks in part to gains from Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Cox Communications Inc. , as well as the inclusion of revenues from eventIS. Its servers and storage segment generated revenues of $12.3 million, down from $17.7 million due to slower shipments to smaller North American cable MSOs.

SeaChange also noted that it won a "large" content distribution network (CDN) order from one of its major US customers. SeaChange didn't name the customer, but a possible candidate is Comcast, which is in the process of building out a CDN to support its "Project Infinity" initiative. (See SeaChange Unveils Cable CDN Lineup, SCTE Expo: MSOs Prep IPTV Push , Comcast Launches 'Project Infinity'.)

Comcast, Cox, and Virgin Media Inc. (Nasdaq: VMED) were SeaChange's 10 percent or greater customers in the period.

— Jeff Baumgartner, Site Editor, Light Reading Cable