SeaChange International has bowed to the demands of one of its biggest investors to expand its board of directors, though a compromise was arranged on the identity of the new directors to be nominated.

Earlier this year, SeaChange investor Ramius determined that SeaChange was undervalued. The London-based hedge fund bought an additional 400,000 shares of SeaChange for a total of 2.25 million shares, or approximately 7.2 percent of the company, making it the third-largest holder of SeaChange stock. Ramius subsequently insisted that SeaChange expand its board from six to eight members and designated two candidates to fill the new positions.

The two were John Buckett, vice president of corporate development at Scientific Atlanta (Cisco), and Edward Terino, president of GET Advisory Services. Both are frequently forwarded by Ramius as nominees for the boards of companies that Ramius invests in.

SeaChange initially resisted the demand. At the time, CEO and Chairman Bill Styslinger responded, “I believe our current business plan will increase value for our shareholders and that the company’s currently constituted board of directors is important to the execution of this plan.”

SeaChange has now relented on adding two directors. The company will appoint Terino, but not Buckett. Instead, the other new director will be Raghu Rau, formerly senior vice president of global marketing and strategy at Motorola, and another executive frequently forwarded as a board nominee by Ramius.

“We welcome open dialogue with, and input from, our shareholders and are pleased to have reached this agreement with Ramius,” Styslinger said. “We are delighted to add Ed and Raghu to the board, as each will bring extensive experience and a strong track record of leadership to the SeaChange board.”

SeaChange will continue on its path to deemphasize hardware in favor of software-based products, a transition that has been rocky, leading to a layoff earlier this year, but which appears to be meeting with initial success, as evidenced by recent financials.

Styslinger added that the company is committed to reaching pre-tax margins within the software segment of 10 percent for fiscal 2011 and 15 percent for fiscal 2012 through R&D cost reductions and other measures.

Demanding board seats is a common practice with Ramius. Earlier this year, the hedge fund successfully negotiated a similar deal with Microtune. The hedge fund arranged to replace three directors with its own slate of replacements, one of whom was Rau.

In the past, Ramius has pulled the exact same maneuver with Tollgrade Communications, Phoenix Technologies, Agilysis and Orthofix.

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