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SeaChange to Cut Staff Again

Jeff Baumgartner
9/5/2018
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Video software and services company SeaChange International is trimming its workforce again amid another restructuring that the company believes will result in annual cost savings of about $6 million.

Staff reductions will be the "primary elements" of the restructuring program, SeaChange International Inc. (Nasdaq: SEAC) CFO Peter Faubert said Wednesday on the company's fiscal Q2 earnings call.

SeaChange has been asked for more details about the coming job cuts, but Faubert noted that they will span across all functions and geographic areas.

He said SeaChange expects to complete the restructuring by the end of fiscal Q3 and enable the company to return to profitability in Q4.

SeaChange underwent a significant reorg last year that reduced its staffing to about 300 people (compared to about 660 it had at the end of the company's fiscal 2016) that also saw the transferring of some engineering from the Philippines to Poland and the shift of some professional services to third parties.

The news of another round of cuts comes a couple of weeks after SeaChange warned that it would miss its Q2 projected revenue and profit targets due to order delays and decisions by customers put off as they evaluate SeaChange's new subscription-based products that use a software-as-a-service model. (See SeaChange Shares Dive 44% on Big Q2 Shortfall.)

Some of those delays came as SeaChange broadens its scope beyond service providers to include new segments such as broadcasters, content owners, and wireless carriers. Closings of certain deals in this area of the business were extended because SeaChange had struck up a new relationship, was more reliant on channel partners, or was required to conduct additional proof-of-concept work.

"We thought we had a read on the timing and what the hurdles were and we just saw it stretch out for different reasons," SeaChange CEO Ed Terino said.

Regarding SeaChange's activity with its more traditional service provider segment, some transactions were held up partly because there "was little urgency to make an upgrade or expand their video platform" among some customers that were prioritizing investments outside of their video delivery ecosystems, Terino said, adding that some of those delayed deals have since closed or are expected to during the current quarter.

Terino was also confident that Liberty Global Inc. (Nasdaq: LBTY), one of SeaChange's key service provider customers, will come back to the well.

"We have dedicated resources serving that customers and I think we have pretty good visibility into their consumption pattern," he said.

After its stock took a heavy hit when SeaChange issued its prelim Q2 warning last month, the stock bounced back a bit today, as shares were up $0.11 (6.59%) to $1.78 in after-hours trading Wednesday.

For Q2, SeaChange posted a GAAP loss of $8.3 million ($0.23 per basic share) on revenues of $11.9 million. SeaChange expects Q3 revenues of $16 million to $20 million, and a loss of $0.06 to $0.15.

— Jeff Baumgartner, Senior Editor, Light Reading

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