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VOD Vendors See Better Days Coming

9/07/2003 8:00 PM Eastern

A smidgen of good news came out of recent earnings calls for cable video-on-demand server vendors SeaChange International Inc. and Concurrent Computer Corp.

Aided by increased VOD server sales, SeaChange on Aug. 26 posted second-quarter net income of $942,000, compared with a loss of $635,000 in the year-earlier period.

VOD revenue rose 15.1%, year over year, from $15.1 million to $17.6 million for the period ended July 31. Improvement in the segment helped boost overall company revenue to $36 million in the quarter.

Concurrent's VOD business, though, posted fourth-quarter revenue of $7 million, a 60% drop from last year's $17.4 million, reflecting what Concurrent called a continued downturn in cable-operator capital spending, including on VOD servers.

"Our fiscal year was challenging due to our North American cable customers' capital spending stall in their drive to generate incremental free cash flow, along with the macroeconomic and geopolitical issues," Concurrent CEO Jack Bryant said in a statement on Aug. 21. "The good news is that these trends appear to be reversing."

Concurrent expects a slight improvement in the coming quarter, with VOD revenue estimates in the $8 million to $9 million range.

For the full fiscal year, VOD division revenue reached $38.6 million in 2003, down 20% from the previous year's $48 million.

Concurrent reported a net loss of $24.6 million for fiscal 2003, versus net income of $4.4 million in fiscal 2002.

Year-over-year revenue at Concurrent dropped from $89.4 million to $75.5 million.

On a more positive note, Concurrent announced a VOD deployment with MSO Adelphia Communications Corp. for its new 4G server product in an unnamed major market.

Bryant also said Concurrent picked up two new commitments from existing customer Comcast Corp. in Midwest markets, before adding, "We are expecting some new market activity from Charter [Communications Inc.] this year."

Concurrent has deployed 859 servers and 309,000 streams serving 4.1 million subscribers in 62 markets.

"Digital VOD helps win subs back from DBS, reduces churn and helps sell digital," Bryant said.

SeaChange said it shipped 87,000 VOD streams in the quarter, for 630,000 streams shipped in the past year. It also expects several MSOs to start testing its VOD-linked, DVD-featured software "shortly."

"We had another very good quarter for VOD, and record VOD revenue," SeaChange CEO Bill Styslinger said.

Most of the streams shipped in the quarter went to Time Warner Cable, Rogers Communications Inc. and Comcast.

As for Comcast and its many new launches, he said: "We're not going to get them all, but we're going to do quite well."

SeaChange executives also expect to see some business from Adelphia by year-end.

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