SeaChange International Shows Continued Revenue Growth

Video-Server, Video-On-Demand Software Vendor Posts Strong Results for Q4, Fiscal-Year 2008
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Video-server and video-on-demand software vendor SeaChange International demonstrated continued revenue growth for both its fourth-quarter and full-year results for its 2008 fiscal year that ended Jan. 31, as the company is benefiting from increased investment by cable operators in VOD systems.

Total revenues for the quarter were $47.8 million, $7.7 million or 19% higher than total revenues of $40.1 million for the fourth quarter of fiscal 2007, representing the second-highest quarterly revenues in SeaChange’s history. Total revenues for all of fiscal 2008 were a record $179.9 million, a 12% increase from total revenues of $161.3 million in the prior fiscal year.

During an earnings conference call late Thursday afternoon, SeaChange president and CEO Bill Styslinger said the company should experience continued revenue growth in fiscal 2009 as cable operators like Comcast -- Acton, Mass.-based SeaChange’s largest customer -- continue to invest in VOD hardware and software to grow their on-demand offerings.

Particular drivers for SeaChange, Styslinger added, should be Comcast’s “Project Infinity” initiative to dramatically grow its on-demand library and Cox Communications’ deal with ABC to offer primetime hits like Desperate Housewives via the VOD platform.

“Having more content available on-demand is what is going to drive SeaChange,” Styslinger said, adding that the growth of advertising-supported VOD content should lead to increased sales of SeaChange’s AdPulse commercial-insertion systems.

VOD vendors like SeaChange have been pressured by cable operators to separate their specialized software from their commodity hardware, allowing MSOs to mix and match vendors. While this has raised concerns over the future viability of VOD vendors like SeaChange, the company said its software-only business -- in which it also supplies set-top software and middleware -- is going well and approaching $100 million in annual revenues.

Styslinger said SeaChange’s Axiom software is already working for Cox VOD sites in Phoenix and other markets, running on Concurrent Computer hardware.

SeaChange is also trying to differentiate on the hardware front with a VOD server based on flash memory, and Styslinger said that technology is being adopted by its cable customers. And the company developed a flash-memory product aimed at broadcasters, which it will show at the National Association of Broadcasters’ 2008 NAB Show this spring.

The company had net income for the fourth quarter of $14.6 million or $0.48 per diluted share, compared with a net loss of $3.7 million ($0.13) for the fourth quarter of last year. Net income for this year’s fourth quarter included a $12.6 million gain on the sale of the company’s one-third interest in FilmFlex Movies, a U.K.-based joint venture that provides an exclusive VOD movie service to Virgin Media.

Styslinger said SeaChange expects to be profitable for the first half and for all of fiscal 2009, without giving specific guidance. SeaChange shares were trading up $0.28 each, or 4.5%, to $6.51 per share in early trading Friday.

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