SeaChange Looking To Shed Media Services Unit

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SeaChange International is looking to slim down even further to focus on VOD and multiscreen video products, with interim CEO Raghu Rau telling investors the company is looking to sell its "non-core" media services business.

The company last week announced an agreement to sell its declining broadcast servers and storage business -- to be named XOR Media -- to a group of private investors. Rau discussed the potential sale of the media services group Thursday in announcing financial results for the quarter ended Jan. 31, 2012.

SeaChange is "actively engaged in the potential divesture of other non-core assets that do not fit into our long-term business strategy," Rau said.

SeaChange's stock price closed down 1.4% Friday, to $7.78 per share.

SeaChange acquired U.K.-based On Demand Group Ltd. in 2005. The unit, now referred to as the media services division, manages content acquisition and aggregation, as well as marketing, programming and other services, that reach more than 6.5 million households. It also provides mobile video services that reach more than 100 million subscribers.

Overall for quarter ended Jan. 31, SeaChange posted revenue of $51.7 million (excluding $2.4 million related to the broadcast servers and storage group), down from $57.9 million a year earlier. The company posted a net loss from continuing operations in Q4 of $3.5 million versus income from continuing operations of $11.2 million a year prior. Included in the fourth quarter fiscal 2012 loss were restructuring charges of $3.1 million, primarily related to layoffs, and $1.8 million of earn-out expenses related to prior acquisitions.

In the fourth quarter, the media services segment generated sales of $8.4 million, up 31% year over year, with the increase the result of recent contract wins in Latin America and Eastern Europe, SeaChange said.

For the full 2012 fiscal year, the company reported total revenue of $197.7 million, down 2% year-over-year, with a net loss from continuing operations of $1.3 million compared with a net profit of $31.6 million for fiscal 2011.

SeaChange noted that the 2011 results included a $27.1 million pre-tax gain on the sale of its equity investment in Casa Systems and InSite One, while the 2012 fiscal year included charges of $6.6 million related to restructuring charges and earn-out expenses related to prior acquisitions.

For the current fiscal year, SeaChange expects total revenue to be $188 million to $200 million with software revenue in the range of $150 million to $160 million and media services revenue to be in the range of $38 million to $40 million. The company is projecting operating income of $19.5 million to $23.5 million for fiscal 2013, "as we anticipate the software segment accounting for $17 million to $20 million and media services segment accounting for $2.5 million to $3.5 million of this range," Rau said.

Rau, a SeaChange board member and business consultant, assumed the CEO role after the departure of founder, chairman and CEO Bill Styslinger in November 2011.

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