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Why SeaChange Earnings Could Grow Faster

By Dan Caplinger – Sep 4, 2013 at 7:15PM

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The video distribution company has provided key tools for telecom companies, giving SeaChange earnings huge growth potential.

SeaChange (SEAC 1.10%) will release its quarterly report on Thursday, and even though you may never have heard of the company, you might have benefited from its products. SeaChange earnings have grown in part because of the rise in viewing of video content through cable, broadcast, and mobile devices.

SeaChange's products help video-service companies manage their operations as well as giving them the capacity to offer on-demand content while also helping handle advertising. It also has profited from the rise in demand for multiple TVs and other viewing devices within homes through its gateway video-delivery services. Let's take an early look at what's been happening with SeaChange over the past quarter and what we're likely to see in its report.

Stats on SeaChange

Analyst EPS Estimate

$0.09

Change From Year-Ago EPS

125%

Revenue Estimate

$38.35 million

Change From Year-Ago Revenue

4.4%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

What's behind a big rise in SeaChange earnings?
Analysts have largely held their views on SeaChange earnings stable in recent months, keeping July quarter estimates unchanged and cutting current fiscal year projections by just $0.01 per share. Still, the stock hasn't done well, falling about 6% since late May.

SeaChange's mixed first-quarter results explain part of reason for the uncertainty that shareholders have seen about the stock. Even though the company's sales came in at the high end of its projected range, SeaChange nevertheless reported a wider GAAP operating loss than last year. Moreover, despite new product revenue growth of 70%, the company kept its full-year guidance unchanged.

Still, SeaChange is working hard to pitch its products. At an industry exhibition in June, the company partnered with Rovi (NASDAQ: ROVI) to demonstrate an integrated product that includes Rovi's viewing-guide technology with SeaChange's multiscreen capabilities.

Those pitches are having substantial success. Late last month, SeaChange said that 11 video providers in four different countries had chosen its products for their service-delivery platforms. Although the company didn't name them in its press release, SeaChange referred to Verizon (VZ -1.73%), AT&T (T -1.22%), and Cablevision (NYSE: CVC) as buyers of their products in its most recent annual report filed in April. Given the success that AT&T and Verizon have had in offering integrated packages of video services to go with their mobile and landline offerings, they could be the most important potential sources of new revenue for SeaChange, even though Cablevision and other cable providers still have a big portion of the video business.

In the SeaChange earnings report, watch for the company to identify where its biggest future opportunities lie. As video technology advances, so, too, will the demands of consumers, and if SeaChange can keep developing the products that viewers want, its growth could continue to accelerate into the future.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

SeaChange International, Inc. Stock Quote
SeaChange International, Inc.
SEAC
$0.43 (1.10%) $0.00
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$37.97 (-1.73%) $0.67
AT&T Inc. Stock Quote
AT&T Inc.
T
$15.34 (-1.22%) $0.19

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