With on-demand video fast becoming a popular choice for cable TV viewers, it stands to reason that the companies providing the backbone of the systems should be enjoying greater growth and profits, too. Reason and the markets, however, don't always coexist.
Take, for example, SeaChange International
Despite revenues rising 11% in the quarter, profits fell to a $2.9 million loss, compared to a $2.2 million loss last year. While the company pointed to higher research and development costs as one of the reasons for the greater shortfall -- investments in future growth are generally considered to be good expenses to incur -- the real growth was seen in general and administrative costs, which grew by more than 47% over the previous year. Add in an additional $1 million increase in intangibles amortization, and total operating expenses soared 18% year over year. The resulting $0.10-per-share loss was $0.04 more than analysts had expected, on revenues that fell by $2 million.
SeaChange has been experiencing a slowdown in on-demand cable spending all year. The company has been holding its breath waiting for the digital simulcast deployments made by cable operators to kick in. For that reason, SeaChange says that this coming fiscal year will see the company return to positive cash flow generation.
For example, Comcast
Importantly, SeaChange's balance sheet remains debt free, and it has used its significant cash to buy assets in Europe, where it sees even greater growth potential.
Not surprisingly, the company's stock took a hit after the earnings release, falling almost 10% in after-hours trading. That might just present an opportunity to investors to get shares at a discount. This company is still strong, and it's poised for the sea of change occurring in cable-TV programming.
Demand further Foolishness:
Time Warner is a Motley Fool Stock Advisor pick. Take the newsletter for a 30-day free spin.