Even if you use products from SeaChange International (Nasdaq: SEAC) every day, you may never have heard the name. This is one of a small handful of companies that makes video-on-demand (VOD) services tick for your cable operator.
For example, I have used VOD from Verizon (NYSE: VZ) and its FiOS service, but have since switched back to Time Warner Cable (NYSE: TWC) subsidiary Brighthouse Networks. Brighthouse's channel lineup and general service are serviceable enough, but VOD is a severe pain in the behind when you've seen FiOS doing it better. This is a real selling point in my eyes, though neither Verizon nor Brighthouse seems to push VOD services in their marketing. I'm planning to go back again once my Brighthouse contract expires.
SeaChange stands for the secret sauce that makes FiOS the better on-demand platform; smaller rival Concurrent Computing (Nasdaq: CCUR) is the solution of choice for all of Time Warner's cable networks. Given the vastly superior end-user experience, I'm not surprised to see SeaChange running a much stronger business than Concurrent.
In the just-reported second quarter, SeaChange's sales grew 14% year over year to $53 million. Non-GAAP earnings doubled to $0.10 per share. By comparison, Concurrent recently closed the books on its fiscal year 2010 with 16% lower sales and a small net loss. SeaChange's stock fell hard on the news, but such is life in the land of lumpy small-cap earnings and analyst guesstimates.
Other on-demand product providers include giants such as Cisco Systems (Nasdaq: CSCO) and Motorola (NYSE: MOT), mainly by way of strategic acquisitions. Because those operations are baked into much larger bodies of work, it's often difficult to see how their video-on-demand businesses are doing. What's pretty clear to me, however, is that SeaChange is the premium choice for investing in a pure-play VOD expert.
And it will only get better. SeaChange is maneuvering to get out of selling server hardware in order to become a higher-margin software business only. I staked my Motley Fool CAPS score on an "outperform" rating four years ago, and I stand by that optimistic opinion even though that pick has actually underperformed the S&P 500 since then. On-demand's time will come to rule broadcast media, and I believe that SeaChange will ride at the head of that assault.
Am I right? Am I wrong? Either way, make your opinion known with a quick CAPS rating on SeaChange.
