Original URL: http://www.theregister.co.uk/2013/11/15/emulex_caves_in/
Emulex throws exec chairman's scalp to activist investors
Profit-free firm gives in to list of demands
HBA and Ethernet analysis vendor Emulex has caved in to sustained activist investor pressure over its board makeup and financial discipline and given up the exec chairman’s scalp.
The winning activist investors are: Elliott Management,which holds 9.8 per cent of Emulex's shares; Starboard Value; Altai Capital; The Vanguard Group; and BlackRock Fund Advisors.
The investors' shares will increase in value because Emulex will:
- Undertake a $200m share repurchase program
- Run a costs-savings initiative to cut $30m of expenses, with “full run-rate benefits of this program” expected to be realised in fiscal 2015
- Add three new directors to its board
- Have the executive chairman of its board, Jim McCluney, resign in February 2014 as per his contract – and not seek re-election.
Jeff Benck, Emulex’s CEO and president put a good gloss on it: “The Board and management team have collaborated with key shareholders to formulate these strategic actions, which reflect our confidence in our underlying business as well as our commitment to enhancing shareholder value.”
He said the cost savings will come from “simplifying our product portfolio, discontinuing additional lower return on investment programs, pursuing some consolidation opportunities and identifying further efficiencies.”
Benck’s CEO tenure depends upon his running Emulex to achieve this.
Jesse Cohn, a Portfolio Manager at Elliott Management, said: “We are very pleased with today’s announcement of Emulex’s shareholder value plan. The meaningful cost reduction initiatives, the plan to return significant capital to shareholders and the board transformation at Emulex are all positive steps marking a renewed commitment to and focus on value at the Company.”
Benck gave McCluney a big pat on the back: “Jim will be deeply missed by the Emulex family, and we want to thank him personally for his service and devotion to the company.”
What McCluney thinks of Elliott Management and the other activist investors can only be guessed at. In this neck of the networked storage woods, business is war without the shooting, Jim, and you just became a casualty. Off you go, because it seems Elliott now calls the shots at Emulex.
PS. Elliott Management is after NetApp now. ®