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SEACHANGE INTERNATIONAL: CABLE ADS, BY SPECIAL DELIVERY

In Chicago, where basketball's Bulls are king, broadcaster Jones Intercable Inc. has trouble getting companies to advertise during hockey games. But in late April, when the Chicago Blackhawks surprised everyone by taking the defending National Hockey League champion Colorado Rockies to six games, the cable operator whipped together ad packages in less than a day--with no advance commitments from sponsors. The slots--which would otherwise have run public-service announcements--became moneymakers.

For that, Jones has SeaChange International Inc., No.22 on BUSINESS WEEK's Hot Growth list, to thank. The four-year-old company makes software that puts ads into digital form, along with video servers that store the data in a central location. Says Kevin Dowell, Jones's group advertising director: ''I can call advertisers in the morning and get their ads on the air in the afternoon.'' That's not all: SeaChange's technology also allows cable operators to target viewers by running dozens of different ads simultaneously in one area. That means they can sell the same space many times over, since a couple in Chicago's swanky suburbs might see an ad for a nearby bakery while someone downtown sees a spot for a local rib joint. Dowell says the system has boosted Jones's revenue by 10%.

CASH-STRAPPED. He's not alone. Soaring demand from cash-strapped cable operators more than doubled 1996 revenues at the Acton (Mass.) company, to $49 million, while earnings tripled, to $4.3 million. Says President, CEO, and Chairman William C. Styslinger, 50: ''We're getting in at the right time.''

Like many other new companies, SeaChange is a product of downsizing. Styslinger, an applied math major in college, headed the fledgling cable unit at Digital Equipment Corp. in the early '90s. There, he helped develop the technology for storing video and moving it over computer networks. But in 1992, DEC slashed the unit's funding.

Styslinger says DEC's cutbacks left him ''disenchanted.'' So he jumped ship, forming SeaChange in 1993. The DEC unit's core engineering team soon followed. Today, SeaChange's software and storage computers are installed at 6,000 cable TV channels in the U.S. That's roughly 65% of the channels currently equipped for digital ad insertion. With about 80,000 cable channels in the U.S., plenty of potential remains. That helped SeaChange go public last November at $15 a share. The stock exploded to 39 1/2, then fell to about 12 in February's tech sell-off before recovering to about 17 1/2.

Despite the financial vise that is squeezing big cable, SeaChange is still atop many operators' shopping lists. Customers include TCI Time Warner and Nynex, which hope to use the technology for such things as pay-per-view movies. ''SeaChange's machines produce revenue for the cable operators,'' says analyst Philip C. Ruepel of Alex., Brown & Sons Inc. He thinks SeaChange will earn $7.7 million this year on sales of $78 million.

SeaChange's success has invited competition--including DEC, which reentered the business in 1994--and Sony Corp., which struck a deal with software rival Channelmatic Inc., a subsidiary of IndeNet Inc., last May. To diversify, Styslinger says SeaChange will expand its offerings to include bigger packages, such as movies. With follow-on products like that, little SeaChange just may be able to keep its rivals at bay.

By Paul C. Judge in Acton, Mass.


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Updated June 15, 1997 by bwwebmaster
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