Is the Worst Over at SeaChange?
Change it knows well. Amid a massive restructuring, its founder and CEO left late last year, followed by the departure of its longtime president. That left it seemingly adrift during a crucial time in which it was looking to unload non-core businesses and become a company more focused on higher-margin software products for service provider back-offices, advanced advertising systems, and set-tops and gateways. (See Now SeaChange Loses Its President and SeaChange Off the Block, CEO Exits .)
It's been a tough road for the advanced video specialist, but the worst may be behind it. It closed the sale of its broadcaster server unit on Thursday, and it's apparently getting some interest for On Demand Group (Nasdaq: SEAC), its U.K.-based subsidiary that acquires and manages on-demand content for customers such as Virgin Media Inc. (Nasdaq: VMED) and Kabel Deutschland GmbH . (See SeaChange Wants to Shed VoD Content Unit, Too.)
"We're actively engaged in making this divestiture happen," says Raghu Rau, who was recently named SeaChange's new permanent CEO. "In the next three to four months, this will be a transformed company." (See SeaChange's Interim CEO Goes Permanent and SeaChange Sells Off Its Broadcast Server Biz .)
But while SeaChange's goal is to become a pure-play software company, it won't technically be there even after it sells off the U.K. unit. Rau says SeaChange intends to hold on to its commodity video streamer products and sell those alongside its back-office for at least "the next couple of years," but acknowledged that SeaChange could end up white-labeling streamers from other vendors. "We're looking at all those options," he says.
So, now what?
Once it completes the ODG sale, SeaChange hopes it can then focus on growing the company again. That in large part means getting customers upgraded to Adrenalin, SeaChange's back-office that expands the management of video to tablets, smartphones and other connected devices, and represents the heart of what SeaChange does now. (See SeaChange Gives VoD a Shot of 'Adrenalin' .)
But it also involves getting customers on Nitro, an HTML5-based user interface focused on all IP-connected devices, including tablets, set-tops and gateways; Infusion, its advanced advertising platform; and Nucleus, its set-top software stack. And it's not ignoring cable's legacy after the debut of Nitro Now, an interface that brings fancier graphics and more advanced navigation capabilities to older QAM-based, MPEG-2 set-tops. (See SeaChange Navigates TV Everywhere.)
But the transition won't be easy; the competition is already tough or getting tougher in all of SeaChange's business segments. Cisco Systems Inc. (Nasdaq: CSCO), for example, acquired a startup recently that gives it a back-office to plug into Videoscape and compete with Adrenalin as operators move on their multi-screen strategies. (See Cisco to Buy BNI Video for $99M .)
But SeaChange is also trying to expand its hitting zone by targeting adjacent markets. MSOs such as Comcast Corp. (Nasdaq: CMCSA, CMCSK) remain big SeaChange customers, but, according to Rau, the vendor will pursue IPTV and mobile operators more aggressively and put more emphasis on the European market.
Rau also isn't ruling out opportunistic "tuck-in" acquisitions. To offer an idea of the size of deals SeaChange has pursued in the past, it paid $12 million for Vividlogic and $13 million for eventIS Group B.V. -- two acquisitions that were key in forming SeaChange's new product strategies. So don't expect anything bigger than those. It's got about $100 million in cash, with more on the way via the recent divestitures. (See SeaChange Buys eventIS and SeaChange Snags VividLogic for $12M.)
"I don't think we need to complicate that [transformation story] with a big acquisition, which would detract a lot of management time and focus," Rau says.
— Jeff Baumgartner, Site Editor, Light Reading Cable