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SeaChange To Restructure Servers And Storage Unit

SeaChange International posted solid results for its quarter ended July 31 -- swinging to a profit an 11% increase in sales -- but the video-on-demand company also lowered its revenue forecast for the full fiscal year 2011 and said it will restructure its declining servers and storage unit.

The Acton, Mass.-based vendor blamed lower VOD server shipments and "software revenue challenges" related to product commercialization and customer launch delays for lowering its fiscal year revenue forecast. SeaChange now expects revenue for the full year to be $215 million to $220 million; previously the company said it expected revenue for fiscal year 2011 to be between $225 million and $235 million.

"Given the full assessment of options relating to the server and storage business, this quarter we plan to restructure this business unit," SeaChange chairman and CEO Bill Styslinger said in announcing quarterly results Thursday.

SeaChange did not disclose how many layoffs it anticipates or what charges it would incur as a result. The company, which has embarked on a high-level strategy to shift its business toward software sales, said it will provide more detail on the Server and Storage business restructuring throughout the third quarter and on its next earnings call.

In the prior quarter, SeaChange recorded a $4.3 million restructuring charge reflecting severance costs for layoffs of 64 employees, or approximately 5% of its work force.

Total revenue for the fiscal 2011 second quarter was $51.6 million, 11% higher than $46.5 million for the second quarter of last year. SeaChange posted net income of $3.5 million ($0.11 per share) compared with a net loss of $0.4 million in the year-ago period.

Highlights in the most recent quarter included a multiyear advertising product agreement with a "major U.S. telco" and the renewal of a multiyear VOD product and services agreements with a top U.S. MSO -- with the latter representing the largest purchase commitment in SeaChange's history, the company said.

Software segment sales were $34.2 million, up 14% thanks largely to contributions from the acquisitions of eventIS and VividLogic, while Servers and Storage generated $10.3 million, down 13% year over year. SeaChange's Media Services segment grew 54%, to $7.1 million for the quarter.

"I'm encouraged by the software market," Styslinger said in his prepared remarks. "We're continuing to work through the transition issues from being a hardware company to a software company. Specifically, we're working through restructuring our customer agreements so we can align revenue more with costs, especially for our newly acquired companies, and we are working on transitioning more custom work to licensed software and charging appropriately for custom work."

SeaChange ended the quarter with cash and equivalents of $76.3 million and no debt. During the second quarter, the company repurchased 178,000 shares of its common stock at a cost of $1.4 million.