SeaChange International announced the departure of president and COO Ed Dunbar and promoted Yvette Kanouff to president -- and laid off up to 4% of its workforce -- in a shift toward a software-oriented product mix and an effort to cut R&D expenses.
The company announced the changes Thursday in reporting results for the quarter and fiscal year ended Jan. 31, 2010. SeaChange reported a $44,000 net profit for the most recent quarter, a 99% drop versus $4.8 million the year prior, while revenue declined 1.8%, to $53.0 million.
"The future of our company is software centric; as a result we are taking various steps to position ourselves for further success in the software arena," SeaChange chairman and CEO Bill Styslinger wrote in a letter to shareholders.
Added Styslinger: "It's been a challenging week for us as we've said goodbye to a number of old friends."
SeaChange also announced that Erwin van Dommelen has been promoted to president of SeaChange Software, responsible for the software business including growth, profit, engineering, product roadmaps and direction, and the general management of the business unit. Dommelen was president of eventIS Group, the Dutch VOD vendor SeaChange acquired last fall.
SeaChange said roughly between 3% and 4% of its employees were laid off. The company last reported 1,046 employees as of Jan. 31, 2009. For the current quarter, the company anticipates severance charges of $1.5 million to $1.8 million related to headcount reductions. The Acton, Mass.-based company said roughly 60% of the layoffs occurred in its software business, while 20% were in corporate G&A and 20% were in the storage business. SeaChange expects annual cost savings of $5 million to $6 million beginning in this year's second quarter from the layoffs.
Kanouff, 44, previously SeaChange's chief strategy officer, will be responsible for the company's business development, overall product strategy, product management, communications and investor relations. She joined the company in 1997.
Dunbar had joined SeaChange in April 2009. Previously he was general manager of Comcast's Atlanta region and also spent five years as a vice president with Comcast Spotlight. Dunbar's last day at SeaChange will be March 15; under the terms of the separation agreement, he will continue to receive his base salary through April 13, 2011, and the 60,000 stock options previously granted to him upon joining SeaChange were accelerated to be fully vested and exercisable through March 15, 2011.
"We are at the point where our software business can stand on its own and produce a good profit," Styslinger said in the letter to shareholders. "We will take advantage of synergies with our recent acquisitions, reviewing strategically our products, utilizing our offshore facilities and making use of a broad development strategy of reusable components to reduce various costs over time and in particular the percent of R&D in software."
SeaChange's current R&D expenses are around 30% of revenue; the company is aiming to cut that to less than 26% in the current fiscal year and 22% for 2012.
Specifically on the software front, SeaChange sees "over-the-top" software for delivering video over the Internet as a major opportunity, according to Styslinger.
"We've won several over-the-top software customers and with the recent news about Viacom pulling out of Hulu, we see further opportunity for our customers to lead in the over-the-top space," he said. "We continue active discussions with various operators in relation to our over-the-top solution."
For the 2010 fiscal year, SeaChange grew recurring software revenue more than 60%. In the fourth quarter, software sales grew 9%, to $34.9 million, primarily from increased VOD software subscription revenues from Comcast and Cox Communications.
Sales in SeaChange's servers and storage segment on the other hand fell 31%, to $12.3 million, in the fourth quarter of fiscal 2010. The drop was due to "an unusually strong" fourth quarter of 2009 and lower VOD hardware sales to North American cable operators.
Total revenue for all of fiscal 2010 was $201.7 million, which was about $100,000 lower than $201.8 million for the prior fiscal year. Net income for fiscal 2010 was $1.3 million or $0.04 per share, compared with $10.0 million, or $0.32 per share for fiscal 2009.
SeaChange expects revenue for fiscal year 2011 of between $225 million and $235 million, with fiscal 2011 first quarter revenue in the range of $52 million to $54 million and breakeven earnings. The guidance "is based on continued strength in VOD software deployments at key U.S. cable television providers and the addition of eventIS and VividLogic software revenue," the company said.