SeaChange To Spin Off Broadcast Servers And Storage Business

In a move to strengthen its focus on software, SeaChange International announced that it will sell its declining broadcast servers and storage business -- to be named XOR Media -- to a group of private investors.

Terms of the deal are not being disclosed. A spokesman said SeaChange will provide "more color" on the transaction when it reports fiscal fourth quarter 2011 and results for the year ended Jan. 31, 2012, on Thursday, March 29.

SeaChange is retaining its video-on-demand software and related hardware business.

The sale to the investment group, led by venture-capital firm VantagePoint Capital Partners, is expected to close after customary regulatory approvals.

SeaChange's Servers and Storage group has been shrinking in the last several years. For the nine months ended Oct. 31, 2011, the unit generated revenue of $23.2 million, down 19.8% from the year-earlier period, with an operating profit of $800,000 versus a $7.4 million operating loss a year prior.

SeaChange said the spinoff will let it focus on its core software and services operations including its next-generation back office, VOD streamers, gateway software and advertising solutions.

"This divestiture is an important part of our strategy to transform SeaChange into a pure-play software company, significantly reduce our overall cost structure, and strengthen our ability to compete in delivering next-generation multiscreen video solutions, while generating cash," SeaChange interim CEO Raghu Rau said in a statement.

Rau added that SeaChange will continue to work with XOR Media. "It's important to note that this sale is not a parting of ways between SeaChange and the new company, XOR Media. We will continue to work together to offer our customers a complete solution. We see this divestiture as a step toward a future relationship -- not the ending of one."

Rau, a member of SeaChange's board and a strategic advisor specializing in marketing, business strategy and venture capital for high-technology companies, took over CEO duties in November 2011 after SeaChange founder, chairman and CEO Bill Styslinger left the company.

Other execs have departed SeaChange since then, including president Yvette Kanouff -- now executive VP of engineering for software design at Cablevision Systems -- and chief financial officer Kevin Bisson.

With the divestiture of the Servers and Storage business, SeaChange will have the flexibility to offer customers hardware from any company. SeaChange said it will continue to provide customer service and support to all of its VOD streaming service provider customers and also will provide customer service and support to any customers who purchase storage products as part of its reseller agreement with XOR Media.

Zheng Gao, president of SeaChange's Storage and Servers unit, will become CEO of XOR Media.

"XOR Media is a new business entity in name, but the same team and processes will be there for our loyal client base -- only now, we have the focus and resources to bring to market storage platforms representing the next-generation NAS-SAN [network attached storage/storage area network] convergence," Gao said in a statement.

VantagePoint partner Terry Chen said in a statement, "The proliferation of digital media presents a huge upside potential for XOR Media. We are excited about the synergy the new company brings with our other holdings including the Blue Whale File System utilized by XOR Media's high performance Universal MediaLibrary storage. We see this as a key investment with the tremendous potential of XOR Media's products, technologies, and people resources, operating independently and in partnership with SeaChange."