Quarterly report pursuant to Section 13 or 15(d)

Segment Information

 v2.3.0.11
Segment Information
 6 Months Ended
Jul. 31, 2011
Segment Information
11. Segment Information
 
The Company is managed and operated as three segments, Software, Servers and Storage, and Media Services. Effective February 1, 2011, the Company realigned its segments by reclassifying the Broadcast software solutions from the Software segment to the Servers and Storage segment. The Company believes the Broadcast software product line is better aligned with the Servers and Storage segment and therefore made the decision in the first quarter of fiscal 2012 to have this product line managed by the Servers and Storage Business Unit Manager. The Segment data for the three and six months ended July 31, 2011 have been recast to reflect the reclassification of the Broadcast software solutions to Servers and Storage. The reclassification of the Broadcast software solutions resulted in a recast of $2.7 million and $4.1 million of revenue for the three and six months ended July 31, 2010, respectively, and did not have a material impact to the income from operations for the Software segment and Servers and Storage segments for the three and six months ended July 31, 2010. A description of the three reporting segments is as follows:
 
 
·
Software segment includes product revenues from the Company’s Advertising, VOD, Middleware, Home Networking and related services such as professional services, installation, training, project management, product maintenance, technical support and software development for those software products, and operating expenses relating to the Software segment such as research and development, selling and marketing and amortization of intangibles.
 
·
Servers and Storage segment includes product revenues from VOD server, Broadcast server and software solutions and related services such as professional services, installation, training, project management, product maintenance, and technical support for those products and operating expenses relating to the Servers and Storage segment, such as research and development and selling and marketing.
 
·
Media Services segment includes the operations of our ODG subsidiary, which include content acquisition and preparation services for television and wireless service providers and related operating expenses.
 
Under this reporting structure, the Company further determined that there are significant functions, and therefore costs, that are considered corporate expenses and are not allocated to the reportable segments for the purposes of assessing performance and making operating decisions. These unallocated costs include general and administrative expenses, other than direct general and administrative expenses related to Media Services and Software, other income (expense), net, taxes and equity losses in earnings of affiliates, which are managed separately at the corporate level. The basis of the assumptions for all such revenues, costs and expenses includes significant judgments and estimations. There are no inter-segment revenues for the periods shown below. The Company does not separately track all assets by operating segments nor are the segments evaluated under this criterion.

 
   
Three Months Ended
    
Six Months Ended
  
   
July 31,
    
July 31,
  
   
2011
    
2010
    
2011
    
2010
  
 
  
(in thousands)
    
(in thousands)
  
Software                        
Revenue:
                        
Products
   $ 13,963     $ 12,923     $ 28,177     $ 33,048  
Services
     20,631       18,621       41,948       38,577  
Total revenue
     34,594       31,544       70,125       71,625  
Gross profit
     19,899       17,442       40,324       39,528  
Operating expenses:
                                
Research and development
     9,136       9,144       18,206       19,313  
Selling and marketing
     4,689       3,853       10,907       8,181  
General and administrative
     542       339       959       515  
Amortization of intangibles
     1,125       769       1,915       1,566  
Restructuring
     79       190       79       535  
      15,571       14,295       32,066       30,110  
Income from operations
   $ 4,328     $ 3,147     $ 8,258     $ 9,418  
                                 
Servers and Storage
                                
Revenue:
                                
Products
   $ 3,655     $ 9,058     $ 8,426     $ 13,566  
Services
     4,072       3,903       6,923       7,534  
Total revenue
     7,727       12,961       15,349       21,100  
Gross profit
     3,765       5,804       6,926       9,488  
Operating expenses:
                                
Research and development
     1,824       3,073       3,821       6,468  
Selling and marketing
     872       2,352       2,006       4,408  
Restructuring
     148       8       148       3,064  
      2,844       5,433       5,975       13,940  
Income (loss) from operations
   $ 921     $ 371     $ 951     $ (4,452 )
                                 
Media Services
                                
Service revenue
   $ 7,769     $ 7,131     $ 16,676     $ 13,499  
Gross profit
     1,117       1,612       2,415       3,220  
Operating expenses:
                                
General and administrative
     915       827       1,902       1,706  
Amortization of intangibles
     36       69       71       140  
      951       896       1,973       1,846  
Income from operations
   $ 166     $ 716     $ 442     $ 1,374  
                                 
Unallocated Corporate
                                
Operating expenses:
                                
General and administrative
     4,658     $ 4,009     $ 9,746     $ 9,755  
Restructuring
     -       -       -       911  
Total unallocated corporate expenses
   $ 4,658     $ 4,009     $ 9,746     $ 10,666  
                                 
Consolidated income (loss) from operations
   $ 757     $ 225     $ (95 )   $ (4,326 )

 
The following table summarizes revenues by geographic locations:
 
   
Three Months Ended
    
Six Months Ended
  
   
July 31,
    
July 31,
  
   
2011
    
2010
    
2011
    
2010
  
   
Amount
    
%
    
Amount
    
%
    
Amount
    
%
    
Amount
    
%
  
    (in thousands, except percentages)     (in thousands, except percentages)  
Revenues by customers' geographic locations:
  
  
    
 
  
North America
   $ 26,885       54 %   $ 28,846       56 %   $ 52,823       52 %   $ 62,720       59 %
Europe and Middle East
     19,313       39 %     16,624       32 %     41,151       40 %     30,688       29 %
Latin America
     1,727       3 %     2,346       5 %     3,246       3 %     6,038       6 %
Asia Pacific and other international locations
     2,165       4 %     3,820       7 %     4,930       5 %     6,779       6 %
Total
   $ 50,090             $ 51,636             $ 102,150             $ 106,225          
 
The following summarizes revenues by significant customer where such revenue exceeded 10% of total revenues for the indicated period:
   
Three Months Ended
    
Six Months Ended
  
   
July 31,
    
July 31,
  
   
2011
    
2010
    
2011
    
2010
  
Customer A
     22 %     19 %     20 %     27 %
Customer B
     11 %     12 %     11 %     12 %
 
At July 31, 2011, two different customers accounted for approximately 15% and 15%, respectively, of the accounts receivable and unbilled receivables balances, and at January 31, 2011, three customers accounted for 17%, 12% and 11%, respectively, of SeaChange’s accounts receivable and unbilled receivables balances.