Set your VCR to record the third-quarter earnings release from SeaChange (NASDAQ:SEAC) on Thursday night. Or just wait for the release and then pull it up on-demand. After all, that's what SeaChange does best.

What Fools say:
Here's how SeaChange's CAPS score rates against some of its peers and competitors:

Market Cap (millions)

Trailing P/E Ratio

CAPS Rating

Arris Group (NASDAQ:ARRS)

$1,130

7.1

****

C-COR (NASDAQ:CCBL)

$602

19.5

*****

SeaChange

$172

N/A

****

Concurrent Computer (NASDAQ:CCUR)

$79

N/A

***

Data taken from Motley Fool CAPS on 11/28/07.

Gee, does that look like a hot sector to you? Our players sure think so, and they like to point out that SeaChange is a leader in its field. Two of them, including one All-Star, call it a prime takeover candidate. And the bears are strangely silent ...

What management says:
SeaChange recently filed a slew of restated financial statements to get back in the good graces of the Nasdaq Listing Qualifications Panel. It wasn't for the usual, options-related reasons, though -- the company had been accounting for an employee sabbatical program the wrong way

What management does:
A full $6 million in writedowns and severance charges in the last quarter put a damper on the otherwise pleasant margin trends. It didn't hurt cash flows any, though, and the reason for taking those writedowns and chopping some heads was to set the company up for sustained profitability going forward.

Margins

4/2006

7/2006

10/2006

1/2007

4/2007

7/2007

Gross

42.4%

46.7%

47.8%

47%

46.8%

42.1%

Operating

(16.4%)

(8.4%)

(7%)

(7.7%)

(6.2%)

(12%)

Net

(12.5%)

(5.7%)

(4.8%)

(5.1%)

(5.1%)

(10.4%)

FCF/Revenue

(23.9%)

(20.4%)

(8.7%)

(4.1%)

2.2%

4.4%

Y-O-Y Growth

4/2006

7/2006

10/2006

1/2007

4/2007

7/2007

Revenue

(13%)

13.2%

25.5%

27.8%

30.4%

12.1%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Video on demand is in the process of revolutionizing the television industry. Right now, the studios are reluctant to license out too much of their premium content to this new platform, but in time, you might not even need a DVR to catch the latest episode of Heroes, or Ugly Betty, or CSI: Miami. You'll just throw away the TV Guide and watch anything you like whenever it's convenient for you. Sports, news, and American Idol would be the last remnants of today's schedule-based programming system.

And SeaChange is one of the premier players in that emerging market. For instance, my local cable company uses video servers from Concurrent here in Tampa, but also SeaChange hardware in Alabama and Bakersfield, Calif. Both platforms run back-office software from Tandberg, and present the on-demand material to cable subscribers through Cisco's (NASDAQ:CSCO) Scientific-Atlanta set-top boxes. Verizon's (NYSE:VZ) FiOS platform, on the other hand, is SeaChange all the way, with Motorola (NYSE:MOT) boxes in living rooms nationwide.

So SeaChange plays with the big boys. In fact, it is a big boy in this sector, despite the diminutive market cap. Pick a race horse in the VOD derby -- I think they're all winners.

SeaChange isn't an official Rule Breaker, but it sure smells like one. Grab a free 30-day trial pass to see what companies are even more bleeding-edge than the VOD pioneer. Or just sign up for a free CAPS account to find the identities of the fellow Fools who were quoted above. They might have more to tell you!

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.