Feeds

Stroppy investor tries to rip 'n' replace STEC's entire board

Fallen flash star's CEO: You're just trying to auction us off

Boost IT visibility and business value

It's a proxy war: activist investor Balch Hill wants to bounce troubled SSD supplier STEC's board - which includes its CEO and its founder - and populate the boardroom with seven of its own nominees.

STEC is the former leading enterprise SSD supplier which has fallen on hard times and is now partway through a strategic direction change involving less dependence on OEMs and a focus on SAS and PCIe interface flash storage products.

STEC shareprice

STEC's share price over the past few years

Its shares have fallen in value from their EMC-supply contract peak in 2009 but are now starting to climb back a little, though nowhere near the giddy heights of four years ago.

Balch Hill and its associate Potomac Capital, according to an SEC 13D filing own 4.1 million (8.8 per cent) and 408,170 (less than 1 per cent) STEC shares respectively. The two investors have now nominated seven directors to serve on STEC's board, hoping that STEC shareholders will vote for these seven and not the existing board members at the upcoming 2013 STEC annual general meeting.

Balch believes that STEC has been mismanaged, is spending too much money on research and development and should return cash to the shareholders. It has previously called for STEC to explore strategic options such as selling the company.

Balch's filing asserts:

[We] believe that [STEC] has lost the trust of its key constituents, including its customers, shareholders, potential strategic partners and potential employees. [We] believe that this lost of trust originates at the top, necessitating meaningful change to the Board and executive management team.

One of its board nominees is Adam Leventhal, the chief technology officer for Delphix, previously of Oracle and Sun, where he was involved with the development of the DTrace diagnostic tool and Sun's 7000 storage system. It's a small world.

Another nominee is Clark Singer, SVP of HANA cloud computing at SAP. Nominees such as these lend credibility, Balch no doubt hopes, to its directorial slate. El Reg notes that none of the nominees is listed as having any experience of running a solid state storage products company.

Balch says it remains "willing to engage in constructive discussions with management and the Board regarding the nomination of directors at the Annual Meeting and the composition of [STEC's] Board in order to avoid a protracted and costly proxy contest."

STEC has issued a response to this, seeking some kind of accommodation. CEO Mark Moshayedi said:

We are disappointed that despite the good faith efforts of our Board of Directors and management to engage in constructive dialogue with Balch Hill and Potomac Capital, they have chosen to discount our 2013 strategic plan to create shareholder value, and instead focus on what we believe is an unnecessary, disruptive and wasteful proxy contest to take control of STEC, all without paying a premium to shareholders.

Nevertheless Moshayedi says STEC is willing to interview four of the nominees and choose two to stand as directors. He says STEC's strategic plan is good whereas Balch's ideas are "committed to advancing a narrow, self-serving agenda to take control of STEC and potentially auction off the company for a price significantly below the company's value, which clearly would not be in the best interests of all STEC shareholders."

You would have thought that with such a strategic gulf between Balch and STEC that STEC would have totally rejected Balch's ideas and gone full tilt into a proxy war. It's a measure perhaps of STEC's idea of the strength and direction of shareholder feeling that it has to extend an olive twig - it's hardly a branch - to Balch, with the offer of supporting two of its nominees.

There is no date set for STEC's 2013 AGM. A negotiated accommodation between STEC and Balch might yet be possible, no doubt depending on whether Balch sees itself getting a good return on its shares. ®

The Power of One Brief: Top reasons to choose HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.