An investor in SeaChange International submitted a letter to the company’s board of directors urging the multiscreen video technology company to seek a sale while the company remains in a position that would be attractive to potential suitors.
“It should be obvious to the Board that SeaChange's small, sub-$100 million revenue base is insufficient to warrant remaining an independent going-concern,” Roumell Asset Management, explained in a release about the letter. “We have talked to industry participants and believe the demand for SeaChange's assets would provide shareholders a meaningful premium to the company's current share price.”
Selling SeaChange is hardly a new idea. SeaChange has been the subject of M&A rumors for several years. TiVo and Rovi, which merged last fall, were once among those that were poking around SeaChange.
Roumell Asset Management, which says it owns 1.2 million shares of SeaChange or roughly 3.3% of outstanding shares, also shared some harsh words about the company’s “poor operating results and weakening balance sheet” and placed a good portion of the blame at the feet of the SeaChange board.
SeaChange has been asked for comment about the letter.
SeaChange, under new CEO Ed Terino, is in restructuring mode amid a plan to return the company to profitability. As part of that, SeaChange, which counts Liberty Global as its sole 10% or greater revenue contributor, has been cutting back staff and transferring its engineering responsibilities from the Philippines to Poland and pivoting some of its professional services capacity to third parties.
Terino was named CEO in April 2016 after the board ousted previous CEO, Jay Samit, who orchestrated SeaChange’s troubled $24.5 million acquisition of Timeline Labs, a social media analytics company, in late 2014. SeaChange later discontinued and shut down Timeline Labs.
Roumell Asset Management is also expressing its views after long-time board director Tom Olson, resigned, effective July 18. According to this July 13 SEC filing, Olson, a member of the SeaChange board since 2001 and a past CEO of National Cable Communications, received 13.2 million votes for election, and 16.6 million against.
That vote, the investment firm suggested, is an indication that “shareholders are finished with the company's ‘business as usual’ culture.”
“We believe the Board needs further reconstitution,” it added. “Candidly, individuals who participated in some of these glaringly inept decisions should consider stepping down. It's clear to any independent observer that new blood is needed in the boardroom.”
SeaChange’s current board includes chairman and former Comcast exec Steve Craddock; Terino; William Markey, president of consulting firm the Relevant C Business Group (RCBG); Mary Cotton, previously CEO of VT iDirect and a former exec with SAP; and Ed Wilson, the co-founder and executive chairman of Timeline Labs, a founding partner at New Form Digital, president and CEO of Dreamcatcher Broadcasting, and a media exec late of Tribune Broadcasting, Fox Television, NBC, CBS and Sony.
Roumell Asset Management had praise for Terino, citing his landslide re-election to the board and his decision to streamline and to build the tech team in Poland, and said SeaChange’s base of customers for Adrenalin (its multiscreen video backoffice platform), relationship with Liberty Global and its equity investment in Layer3 TV “are enviable assets.”
“We believe Mr. Terino's approach of protecting the company's balance sheet by reducing expenses, while focusing on discrete market opportunities, is the correct one and will ultimately position the company for a successful sale,” the investor noted.
Shares in SeaChange dropped 7 cents (2.48%) to $2.75 each Thursday. It has a market cap of about $97.15 million.