SeaChange Swings to a Loss on Lower Revenues

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VOD equipment provider, SeaChange International, has released preliminary financial results for its fiscal second quarter (2006), ended July 31st (note: the company says that the results are preliminary, because it is currently completing an analysis of how to properly account for an $8.3 million investment in cable edge device manufacturer, Casa Systems):

• Revenues totaled $26.2 million, compared to $43 million for the year- ago quarter, a 39% decrease.
• Net losses totaled $6.6 million, or $0.23 per diluted share, compared to net income of $3.3 million, or $0.12 per diluted share, for the year- ago quarter.
• VOD systems revenues totaled $12 million, compared to $25.2 million for the year-ago quarter.
• Combined systems revenues totaled $14.4 million, compared to $32.4 million for the year-ago quarter. In addition to VOD systems revenues, the combined figure includes revenues of $1.7 million from advertising systems (compared to advertising systems revenues of $3.4 million for the year-ago quarter), and revenues of $700,000 from broadcast systems (compared to broadcast systems revenues of $3.8 million for the year-ago quarter).
• Service revenues totaled $11.8 million, compared to $10.6 million for the year-ago quarter.
• The company anticipates its revenues for the fiscal year as a whole will be lower than its previously issued guidance of $160 million. However, it says it believes that the second half of the fiscal year will see better financial results, and that the results for the first half of next year will improve upon those results.

In a prepared statement issued with SeaChange's earnings release, the company's president and CEO, Bill Styslinger, blamed the decline in its revenues and earnings on a slowdown in demand for VOD equipment on the part of cable operators, and on the fact that demand for VOD equipment on the part of telco's had not grown as quickly as had been anticipated: "Although telco initiatives are moving forward around the world, their VOD deployments are later than we anticipated?In the US, cable operators' VOD system spending has slowed, however we do expect that demand will increase as they extend their digital simulcast installations." SeaChange's telco customers include NTT in Japan, Telus and Manitoba Telecom in Canada, and Verizon in the US. Its cable customers include Comcast and Time Warner in the US, and ntl and Telewest in the UK.

Styslinger's statement also cast some light on SeaChange's product plans: "We are aggressively expanding our product and service offerings to take even greater advantage of the opportunities in the transition to on-demand television. Our Axiom command and control software handles critical operations and is proven in the world's largest metropolitan VOD deployments. Our Multiverse middleware will combine the advantages of Liberate, Minerva and VODlink and enable the creation of compelling on-demand and IP television applications. Our Casa Systems investment provides us with access to the transport, modulation and splicing businesses for both cable and telcos. And for broadcasters, networks and studios, we believe that our MediaClient architecture will provide significant advantages in the way that content is stored, distributed and leveraged across a variety of platforms."

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