Coiled Up Spring Getting Ready to Explode During Industry Consolidation
A major wave of M&A activity is beginning in the cable TV industry. Programming costs are soaring through the roof and cable TV operators need to consolidate and gain leverage to push costs down. As cable TV operators merge and achieve big cost savings, they will rapidly increase their spending on technologies that will fuel the industry's future growth.
Cable TV operator stocks are rallying, but the biggest gainers during this summer's consolidation wave will be the industry's leading technology vendors. We could soon see the largest tech vendors like Cisco (CSCO) rapidly acquire smaller cable TV tech pure plays like Seachange (SEAC) and Concurrent (CCUR).
An analyst at Brean Capital issued a research note about SEAC in December, which speculated that it's a takeover target, "Because of SEAC's leading position in key areas of MSO investment, it is not likely to remain an independent company in an industry consolidation scenario." The consolidation scenario they alluded to is now getting underway, much sooner than expected. SEAC reached new 52-week highs the past three trading days!
Yesterday, SEAC hit a new 52-week high of $12.72 and closed at $12.58. It has a market cap of $412mm with $114.23mm in cash and an enterprise value of $297.77mm or 1.91X revenues of $156.11mm. SEAC is rising due to takeover speculation and CCUR will likely be next to explode! Search for and read the article 'Motorola, Cisco Buyouts Vex VOD Market' to see how CCUR is also a takeover target with Arris reported to have shown interest. CCUR just surpassed SEAC to become the #1 VOD tech vendor, while Arris is #4 and could easily acquire CCUR to dominate the market - both companies are based in Atlanta!
CCUR needs to rise to $16.35 just to match SEAC's enterprise value/revenue ratio of 1.91! When CCUR files their 10-K next month, their trailing non-GAAP EPS will likely reach $0.50 and surpass SEAC's non-GAAP EPS of $0.44!