SeaChange Buys Digital Video Arts

Hoping to boost its stake of the custom set-top software
market, SeaChange International Inc. acquired Digital Video Arts Ltd. for $11 million in
stock Dec. 30.

SeaChange president and CEO Bill Styslinger said it was the
15 engineers who work for Dresher, Pa.-based DVA that attracted him to the company. All
current DVA employees will continue to work for the company, and SeaChange will double the
size of its new subsidiary by the end of 2000, Styslinger added.

"Our own set-top-box application will be transferred
into their hands," Styslinger said, noting that DVA will take over development work
on SeaChange's movie-on-demand application.

DVA works with interactive-television and middleware
vendors such as WorldGate Communications Inc., ACTV Inc., Wink Communications Inc., OpenTV
Inc., Source Media Inc.'s Interactive Channel and Intertainer Inc. to integrate their
products with set-tops.

"DVA allows [SeaChange] to quickly integrate with
multiple set-tops, so it helps them to get onto multiple platforms, which is what they
need to do," C.E. Unterberg, Towbin analyst Seth Spaulding said. "It's in
their best interest to be platform-agnostic."

DVA generated between $2 million and $3 million in revenue
last year, Styslinger said.

The company currently only does integration work on General
Instrument Corp. digital set-tops, mostly the "DCT-2000" and
"DCT-3000." But it is also talking with other set-top vendors, including some of
the new players, DVA program manager Mark Myslinski said.

"You can bet we're going to pop up on other
set-tops, like [ones from] Phillips [Consumer Electronics Co.], Sony [Corp.] and Pace
[Micro Technology plc]," Myslinski said. "All of the set-top manufacturers are
approaching us to see if we can do work for them."

While SeaChange plans to use DVA to integrate electronic
program guides and interactive program guides, the company has no plans to develop its own
EPG or IPG, Styslinger said, adding, "There are enough vendors out there

SeaChange shares fluctuated from the low-$20s to the low
$30s early last week, sparking several calls to the company from investors, Styslinger
said. But he added that there were no large sellers, attributing the fluctuating price to
the roller-coaster ride NASDAQ saw last week.

SeaChange stock has steadily increased from $10.83 Oct. 5
to $31, its closing price Jan. 5. Styslinger attributed the jump to increased investor
interest in the video-on-demand market, as more MSOs are placing orders and more vendors
are approaching shipment dates.