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SeaChange Q3 Software Sales Rise On Home Gateway, Multiscreen Wins

SeaChange International posted 13% higher software revenue for the third quarter, with the video-software company pointing to a "significant home gateway software licensing transaction" with a large U.S. operator as well as six new customers for its multiscreen video products.

In September, SeaChange said it was working with St. Louis-based Charter Communications to "test next-generation home gateway software."

Software segment revenue for the quarter ended Oct. 31 was $37.6 million, up $4.4 million from the year-earlier period. In addition to the home gateway software and multiscreen-video deals, SeaChange cited higher VOD software licensing revenue from domestic cable TV customers and higher advertising product shipments for the increase, partially offset by lower VOD subscription revenue.

SeaChange said AT&T, Comcast and the U.K.'s Virgin Media were continuing their deployments of the vendor's advanced-advertising products. The company now has 13 multiscreen-video customers worldwide, including six in North America.

Overall, for its fiscal third quarter of 2012, SeaChange reported $53.4 million in revenue, up 9% year over year, and net income of $400,000 million compared with a net loss of $5.2 million for the third quarter of 2010.

Last week, SeaChange announced that founder, chairman and CEO Bill Styslinger was retiring effective immediately. Board member Raghu Rau, a strategic advisor specializing in global marketing, business strategy and venture capital for high-technology companies, assumed responsibilities as interim CEO.

"SeaChange has made good progress in fiscal 2012 toward controlling costs and starting its next phase of growth through emergent multiscreen video opportunities globally with its legacy VOD customers and several new ones," Rau said in announcing results. "However, as the company is committed to a software strategy, it will work to increase its overall margins to ensure its long-term ability to address the volume of opportunity and innovate even further for our video service provider customers."

The company's Servers and Storage segment had revenue of $7.9 million, up 1% from a year ago. The unit benefited from expansions at Canadian MSO Rogers Communications, as well as a European deployment and several server orders from customers in China, SeaChange said. However, the company said, the Servers and Storage group had lower VOD server shipments to North American customers, lower broadcast product orders and reduced VOD server services revenues in the most recent period.

SeaChange's Media Services segment generated third-quarter revenue of $7.9 million, down $200,000 from the year-earlier quarter, as a result of lower content services revenues from customers in the U.K. and Greece. That was partially offset by revenues from newer customers in France, Eastern Europe and Latin America.

SeaChange ended the third quarter with cash and investments of $88.9 million and no debt, compared with $97.9 million and no debt the previous quarter. The company said the decrease was the result of increased accounts receivable due to sequentially higher revenues and the timing of product shipments during the quarter, as well as acquisition payments made to the former shareholder of eventIS and capital expenditures that were partially offset by lower inventory.

In June 2010, SeaChange reached an agreement with its largest shareholder, Ramius International, under which SeaChange increased the size of its board from six to eight members and appointed two new directors: Rau and Edward Terino, president of GET Advisory Services, a strategic and financial management consulting firm.

A year ago, Ramius urged SeaChange to re-evaluate its decision to not sell off its money-losing Servers and Storage business.

SeaChange spent $597,000 in the most recent quarter on legal and professional fees in connection with the review of strategic alternatives. Last week the company said that after reviewing its options, the board decided that it is in the "best interest of shareholders to continue as a standalone, publicly traded company." However, the company will continue to evaluate alternatives for certain non-core businesses, SeaChange said.