Massive consolidation is beginning to occur in the cable TV industry and many cable TV operators are now the subject of M&A speculation. During the last big wave of cable TV consolidation in 2006, the operators were the first stocks to rally, but the focus then shifted to cable TV technology vendors. Seachange (SEAC) was the subject of a Brean Capital analyst note in December that said "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."
SEAC has been rapidly rising in recent days, now that the wave of industry consolidation is here. SEAC soared past its 52-week high of $12.10 on Monday and set a new 52-week high yesterday of $12.50 where it has an enterprise value/revenue ratio of 1.89. In 2006, SEAC was also the subject of takeover speculation - but in every story about SEAC in 2006, its rival CCUR was also mentioned as a takeover target. CCUR recently surpassed SEAC to capture the #1 largest video on demand (VOD) technology market share, and CCUR now leads other key areas of MSO investment like start-over/look-back, Big Data Analytics, and multi-screen/CDN solutions.
If you look at the reasons Brean calls SEAC a takeover target - CCUR fits all of the same criteria, and CCUR is very undervalued compared to SEAC, with CCUR trading with an enterprise value/revenue ratio of only 0.71. For CCUR to match SEAC's enterprise value/revenue ratio of 1.89, CCUR needs to rise to $16.21 per share! Look for CCUR to rally big in the weeks ahead, and for CCUR to rise above SEAC's share price in August. CCUR's year-end results/10-K filing is due out next month and its non-GAAP EPS for fiscal 2013 could potentially reach $0.50, exceeding SEAC's current trailing non-GAAP EPS of $0.44. CCUR recently increased its dividend by 100%, and now pays a huge cash dividend yield of 6.2%, the highest in the industry! CCUR would likely attract a much larger premium than SEAC.