New analyst coverage!
Subject: NEW COVERAGE INITIATED ON SEACHANGE INTERNATIONAL
FIRST CALL RESEARCH NETWORK
06:54pm EST 29-Dec-99 Morgan Keegan (Murray J. Arenson (214) 365-5520) SEAC
NEW COVERAGE INITIATED ON SEACHANGE INTERNATIONAL
Morgan Keegan & Company, Inc.
Research Notes
Date: December 29, 1999 52 Wk Range $40 - $4
SeaChange International Inst. Ownership (%) 27.7
SEAC* - $33 ? Mgt. Ownership (%) 35.3
Avg. Daily Vol.(000) 195.8
Current Chg. From Market Cap. (mill) $732
Rating: O-S NR Dividend Yield (%) NIL
EPS: 12/98A: $(0.25) Book Value $1.54
12/99E: $0.04 Price/Book 21.8x
12/00E: $0.14
Rpt. Date Range
Q4:99: $0.02 vs.$(0.05) Feb. First Call: $0.02 vs. $(0.05) $0.02 - $0.02
Q1:00: $0.01 vs.$0.00 First Call: $0.01 vs. $0.00 $0.01 - $0.01
Q2:00: $0.02 vs.$0.01 First Call: $0.01 vs. $0.01 $0.01 - $0.01
Q3:00: $0.04 vs.$0.02 First Call: $0.05 vs. $0.02 $0.05 - $0.05
NEW COVERAGE INITIATED ON SEACHANGE INTERNATIONAL
We are initiating new coverage on SeaChange International with an
Outperform rating. SeaChange is one of the world's leading suppliers of
video servers and is now bringing its technology to the emerging video-
on-demand (VOD) industry. We believe VOD has the potential to become a
billion dollar per year business during the next decade, and we expect
SeaChange to be a market leader. SeaChange is also a leading supplier
of digital advertising insertion systems to the cable television
industry.
? SeaChange has been selected by major cable operators for VOD market
trials and installations. These service providers include: Time Warner
Cable (TWX - $70 5/16), Comcast Cable (CMCSA - $49 13/16), Telewest
Communications (UK), Rogers Communications (Canada)(RG - $24 1/16), and
Guandong Cable (China's third largest operator). We expect additional
announcements and trials during the first half of 2000 leading to
commercial deployments in the second half of 2000 and beyond.
? SeaChange is also the leading provider of server-based advertising
insertion systems in the United States with nearly 80% of the market.
The company's entry into the video-on-demand arena is a natural
outgrowth of its ad insertion business because its VOD system is based
on the same core technology, and it appeals to the same US target
market: cable operators. The advertising insertion business is also
poised for a re-emergence with the introduction of insertion onto
digital channels. The company's first market trial of this technology
is underway with Cox Communications (COX - $51 1/8)in Phoenix, AZ.
Interactive advertising could further multiply the market potential
within that arena.
? SeaChange is also building a market leadership position in the
Broadcast video server industry. The company has experienced double
digit growth from quarter-to-quarter since the product line was
introduced in 1998.
We valued SeaChange using a discounted cash flow model in order to
account for the long-term growth we expect from the company. We
incorporate a sensitivity analysis that factors in potential market
share scenarios as well as potential peak streaming ratios (i.e., VOD
usage rates). We believe our upside assumptions are within reason;
however, we also believe it is too early to forecast one company as a
dominant market leader. As a result, we are setting a target price of
$55, which represents the average of our two moderated upside
valuations.
Murray J. Arenson / B. Michael Poustovoi
Digital Media and Entertainment
(214) 365-5520 / (214) 365-5536
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST
* Morgan Keegan & Company, Inc. makes a market in the shares of this
security.
The information contained herein is based on sources considered to be
reliable but is not represented to be complete and its accuracy is not
guaranteed. The opinions expressed herein reflect the judgment of the
author at this date and are subject to change without notice and are not
a complete analysis of every material fact respecting any company,
industry or security. Morgan Keegan & Company, Inc. and its officers,
directors, shareholders, employees and affiliates and members of their
families may make investments in a company or securities mentioned
herein before, after or concurrently with the publication of this
report. Morgan Keegan & Company, Inc. may from time to time perform or
seek to perform investment banking or other services for, or solicit
investment banking from any company, person or entities mentioned
herein. Neither the information nor any opinion expressed herein
constitutes a solicitation for the purchase or sale of any security.
First Call Corporation, a Thomson Financial company.
All rights reserved. 888.558.2500
Note ID: 201121
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