Annual report pursuant to Section 13 and 15(d)

Investments in Affiliates

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Investments in Affiliates
12 Months Ended
Jan. 31, 2012
Investments in Affiliates

5. Investments in Affiliates

 

We periodically review indicators of the fair value of our investments in affiliate companies in order to assess whether available facts or circumstances, both internally and externally, may suggest an other than temporary decline in the fair value of the investment. There were no indications of other than temporary declines in the fair value of investments in affiliates as of January 31, 2012 and 2011, respectively. Our investments in affiliates under the cost method of accounting are as follows:

 

    Year ended January 31,  
    2012     2011  
    (in thousands)  
Minerva     1,000       1,000  
Visible World     552       552  
Other investments     1,461       1,361  
Total investments in affiliates   $ 3,013     $ 2,913  

  

Minerva. We own 1.3 million shares of preferred stock representing 2.8% of the total capital stock of Minerva Networks, Inc. (“Minerva”), a California based company specializing in software products for the telecommunications and television markets. The preferred shares are convertible to 1.3 million shares of common stock under certain conditions as defined in the Stock Purchase Agreement. We account for this investment under the cost method of accounting.

 

Visible World. We own less than 5% of the common and preferred stock of Visible World and we account for this investment under the cost method of accounting. For fiscal years 2012, 2011 and 2010, we recognized revenues of approximately $11,000, $532,000 and $641,000 respectively, from Visible World.

 

On Demand Deutschland GmbH & Co. KG On February 27, 2007, the On Demand Group Limited (“ODG”), a wholly-owned U.K. subsidiary of SeaChange, entered into an agreement with Tele-Munchen Fernseh GmbH & Co. Produktionsgesellschaft (TMG) to create a joint venture named On Demand Deutschland GmbH & Co. KG. On Demand Deutschland specializes in establishing on-demand and pay-per-view services on multiple platforms in German-speaking Europe. ODG contributed $2.8 million to acquire its 50% ownership interest in the joint venture of which $2.6 million consisted of the fair value of customer contracts and content license agreements contributed by ODG and $154,000 represented a cash contribution. The customer contracts and licensed content had no book value. We determined that this investment is an operating joint venture and does not require consolidation. Consequently, we account for this investment under the equity method of accounting.

 

ODG entered into a Service Agreement with the joint venture whereby ODG provides content aggregation, distribution, marketing and administration services to the joint venture under an arm’s length fee structure. For the years ended January 31, 2012, 2011 and 2010, ODG recorded revenues of $1.8 million, $1.9 million, and $1.8, respectively, related to the Service Agreement. ODG’s share of profits from this agreement in proportion to its equity ownership interest is eliminated in consolidation.

 

ODG recorded its proportionate share of the joint venture’s losses of $487,000, $36,000 and $653,000 for fiscal 2012, 2011 and 2010, respectively. Due to the capital distribution and ODG’s share of the joint venture’s net loss exceeding the book value of its investment in the joint venture, the investment is recorded as a long-term liability of $743,000 and $1.2 million at January 31, 2012 and 2011, respectively.

 

Casa Systems. On April 26, 2010, we sold our entire equity investment in Casa Systems, Inc., a Massachusetts based company that specializes in video-on-demand products for the telecommunications and television markets, for $34.1 million realizing a pre-tax profit of $25.2 million.

 

InSite One. In the fourth quarter of fiscal 2011, we sold our entire equity investment in InSite One for $4.6 million in cash realizing a pre-tax profit of $1.9 million.