Feeds

Boardroom brouhaha brewing at Emulex after Endace buy

Why not buy shares instead, demands share holder

  • alert
  • submit to reddit

Choosing a cloud hosting partner with confidence

You win some; you lose some. Emulex has completed its acquisition of networking analytics company Endace against the opposition of activist investor Elliott Management, but had to accept the appointment of two Elliott nominees to its board.

Emulex mostly sells SAN Host Bus Adapters (HBAs) and has a line of Ethernet Converged Network Adapters (CNAs) and embedded storage controllers. Generally speaking it has not lived up in revenue terms to the promises made when it resisted a takeover attempt by Broadcom in 2009 and its share price has fallen.

Naturally this disappointed its investors, opening up an opportunity for activist investors like Elliott Management, run by billionaire Paul Singer, and fellow investors Altai, to buy stock and agitate for shareholder value to be quickly boosted through asset sales, dividends or even a divestment.

Elliott has been agitating for board representation on the basis of its stock holding, saying Emulex should not waste its money on the pointless acquisition of Endace.

Altai has said: "We are perplexed by the Company's recent announcement to acquire Endace ... We would have preferred that Emulex use its strong net cash balance to continue to repurchase its undervalued shares."

Elliot's Jesse Cohn, a portfolio manager, said in a canned quote: "We are very pleased to have worked collaboratively with Emulex to add Gene Frantz and Greg Clark to its Board. Jim and his team at Emulex have a solid strategy and have developed leading technology in their focused markets and we believe that the addition of Gene and Greg to the Board will help Emulex to realise meaningful value for stockholders."

Since Emulex has not developed leading technology in the Ethernet monitoring area but acquired it through Endace, this statement is not exactly supportive of the Endace acquisition.

The two additions to Emulex's board, Frantz and Clark, joined the company at Elliott's behest - but with the approval of Emulex.

Gene Frantz' background includes being a partner at TPG Capital, Oracle Ventures, and Morgan Stanley. He enjoyed prior stints on the boards of ALLTEL, Avaya, Freescale Semiconductor, Network General, MEMC Electronic Materials, Paradyne Networks, SMART Modular Technologies and Certance Holdings. He calls himself a private equity professional.

Greg Clark is the CEO of Blue Coat Systems and has been CEO at Mincom and E2open, as well as founding security software firm Dascom, acquired by IBM in 1999 and used as the foundation for the Tivoli security product line. Clark was an IBM Distinguished Engineer and vice president of IBM's Tivoli Systems for a while.

Emulex's board will now grow to 11 directors unless some of the existing nine go.

Emulex collaborated with Elliott in the addition of these two directors to its board and there is an agreement between Emulex and Elliott which includes limitations on acquisitions of additional Emulex shares above its 15 per cent stake by Elliott.

Other aspects of the deal include Elliott agreeing not to enter into a proxy war (competing for shareholder votes at Emulex AGMs) on the sale of Emulex until March next year, or any other Emulex proxy contests until August this year.

With two Elliott cuckoos in the Emulex nest, we can expect them to throw their weight about and agitate for change; change which will help Elliott make a profit on its Emulex holdings.

Will the Endace nestling have to go? Are in-array controllers toast? The clock is ticking and the old Emulex board is going to have to make some hard choices. ®

Intelligent flash storage arrays

More from The Register

next story
Azure TITSUP caused by INFINITE LOOP
Fat fingered geo-block kept Aussies in the dark
You think the CLOUD's insecure? It's BETTER than UK.GOV's DATA CENTRES
We don't even know where some of them ARE – Maude
729 teraflops, 71,000-core Super cost just US$5,500 to build
Cloud doubters, this isn't going to be your best day
Want to STUFF Facebook with blatant ADVERTISING? Fine! But you must PAY
Pony up or push off, Zuck tells social marketeers
Oi, Europe! Tell US feds to GTFO of our servers, say Microsoft and pals
By writing a really angry letter about how it's harming our cloud business, ta
SAVE ME, NASA system builder, from my DEAD WORKSTATION
Anal-retentive hardware nerd in paws-on workstation crisis
Astro-boffins start opening universe simulation data
Got a supercomputer? Want to simulate a universe? Here you go
prev story

Whitepapers

Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Getting started with customer-focused identity management
Learn why identity is a fundamental requirement to digital growth, and how without it there is no way to identify and engage customers in a meaningful way.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
The hidden costs of self-signed SSL certificates
Exploring the true TCO for self-signed SSL certificates, including a side-by-side comparison of a self-signed architecture versus working with a third-party SSL vendor.
New hybrid storage solutions
Tackling data challenges through emerging hybrid storage solutions that enable optimum database performance whilst managing costs and increasingly large data stores.