Starboard Value LP (together with its
affiliates, director nominees, and Oliver Press Partners, LLC, the "Starboard
Group"), the second largest shareholder of Integrated Silicon Solution, Inc.
ISSI ("ISSI" or the "Company") with ownership of approximately
8.0% of the Company's outstanding common stock, today announced that the
Starboard Group has delivered a letter to Scott Howarth, ISSI's President and
Chief Executive Officer, and ISSI's Board of Directors (the "Board").
The Starboard Group also announced today that Starboard submitted a letter to
the Company on November 28, 2014 nominating five candidates with strong,
relevant backgrounds for election to the Board of Directors at the Company's
2015 Annual Meeting. Each director candidate's biography is included below.
The Starboard Group looks forward to continuing its constructive dialogue with
the Board and management regarding ISSI's business, Board composition, and
opportunities to create value for shareholders.
The full text of today's letter follows:
December 1, 2014
Integrated Silicon Solution, Inc.
1623 Buckeye Drive
Milpitas, CA 95035
Attn: Scott Howarth, President and Chief Executive Officer
cc: Board of Directors
Dear Scott,
Starboard Value LP, together with its affiliates ("Starboard"), and Oliver
Press Partners, LLC ("OPP"), currently own approximately 8.0% of the
outstanding common stock of Integrated Silicon Solution, Inc. ("ISSI" or the
"Company"), making us the Company's second largest shareholder. Under
separate cover, we have delivered a formal notice of our nomination of a slate
of exceptionally qualified director candidates for election to the Board of
Directors of ISSI (the "Board") at the 2015 Annual Meeting.
We appreciate the time that you and John Cobb have spent with us at your
headquarters in Milpitas and at Starboard's offices in New York, and we hope
to continue our constructive dialogue regarding the Company's business and
opportunities to create value for shareholders. We believe that ISSI is
meaningfully undervalued and that substantial opportunities exist within the
control of management and the Board to create value for all shareholders.
However, in order realize this potential, we believe that the Board needs to
be reconstituted with directors that have the experience, the independence,
and the shareholder-oriented mindset to oversee and implement the changes
necessary to drive substantial value.
ISSI has carved out a strong niche selling specialty memory products – DRAM
and SRAM – to the auto and industrial markets. This highly attractive
business, which now comprises approximately 75% of ISSI's revenue, is a
growing, sustainable, and profitable business, given long design and product
cycles and ISSI's inherent advantages in supplying products ideally suited for
these markets. Despite this strong business, which has grown from
approximately $44 million to $230 million over the past five fiscal years, a
compound annual growth rate in excess of 100%, ISSI currently trades at a
substantial discount to peers, and is in fact one of the cheapest companies in
the semiconductor space on multiple valuation parameters.
We believe this discount is due in part to the distraction from a number of
non-core acquisition initiatives, including two recently-acquired businesses
that ISSI does not appear to be gaining traction in, Analog and NOR Flash. As
we have discussed with you, we believe that management's focus and
shareholders' capital would be better spent on ISSI's profitable and growing
core business. Moreover, given the Company's mixed track record of acquiring
businesses and the sizable discount at which the Company currently trades, we
do not believe that further acquisitions would be a prudent use of ISSI's
substantial cash balance at this time.
We believe that the fresh perspective brought by new, highly qualified
directors will be critical in evaluating the future of ISSI's non-core
businesses. ISSI's current Board structure is highly unusual and not in line
with best practices, with three of the Company's executive officers on the
Board, including two of the Company's founders as Executive Chairman and Vice
Chairman. In fact, Institutional Shareholder Services, a leading corporate
governance and proxy advisory firm, gives ISSI a QuickScore of 9 in its
"Board" category, indicating an extremely high level of concern, while
flagging "Board Composition" as an issue. Glass Lewis, another leading
corporate governance and proxy advisory firm, has recommended WITHHOLD votes
for certain directors in each of the past four years, also citing concerns
regarding board composition. Moreover, the Board's Vice Chairman is also an
Executive Vice President of the Company, reporting to the CEO, which creates
confusing reporting lines and potential conflicts of interest, since the CEO
must report to the Board. In addition, despite their long-tenure and a
generous set of equity incentive plans, members of the Board have divested
themselves of stock at such a rate that the nine current directors now
collectively own less than 400,000 shares, or approximately 1% of the
Company's common stock.^1
As we hope you can easily recognize upon review of our nominees'
qualifications, we have assembled a slate of candidates with outstanding and
deeply relevant backgrounds for ISSI who can add tremendous value to the
Company. Our nominees include individuals who have held senior operating and
board roles within highly successful semiconductor and technology companies,
and have direct knowledge of the businesses in which ISSI competes, as well as
shareholder representatives who can provide the meaningful ownership
perspective that does not appear to be present on the Board as currently
constituted.
We look forward to working constructively with you in order to reconstitute
the Board with the most qualified directors for the benefit of all
shareholders. We take our investment in the Company, and the Board's
stewardship of shareholders' capital, very seriously. As one of the largest
shareholders of ISSI, we intend to maintain an open dialogue in working with
you to ensure that value is created for all shareholders. We hope that you
will take advantage of this opportunity to engage constructively with us to
address the concerns that we and others have expressed.
Best Regards,
Peter A. Feld Clifford Press
Managing Member Managing Member
Starboard Value LP Oliver Press Partners, LLC
The Starboard Group's Highly Qualified Nominees:
Peter A. Feld has served as a member of Starboard Principal Co GP LLC and a
member of the Management Committees of Starboard Value GP and Starboard
Principal Co GP LLC since April 2011. From November 2008 to April 2011, Mr.
Feld served as a Managing Director of Ramius LLC and a Portfolio Manager of
Ramius Value and Opportunity Master Fund Ltd. From February 2007 to November
2008, Mr. Feld served as a Director at Ramius LLC. Mr. Feld joined Ramius LLC
as an Associate in February 2005. From June 2001 to June 2004, Mr. Feld was an
investment banking analyst at Banc of America Securities, LLC. Since October
2014, Mr. Feld has served as a member of the board of directors of Darden
Restaurants, Inc., a full service restaurant company. Mr. Feld has also served
as a member of the board of directors of Tessera Technologies, Inc., which
develops, invests in, licenses and delivers innovative miniaturization
technologies and products for next-generation electronic devices, since June
2013. Mr. Feld previously served as a member of the board of directors of
Unwired Planet, Inc. (f/k/a Openwave Systems Inc.), a public company with a
portfolio of patents many of which are considered foundational to mobile
communications, and span smart devices, cloud technologies and unified
messaging, from July 2011 to March 2014 and served as its Chairman from
September 2011 to July 2013. Mr. Feld also previously served on the board of
directors of Integrated Device Technology, Inc., a company which designs,
develops, manufactures and markets a range of semiconductor solutions for the
advanced communications, computing and consumer industries, from June 2012
until February 2014. In addition, Mr. Feld served on the boards of directors
of SeaChange International, Inc., a leading global multi-screen video software
company, from December 2010 to January 2013 and CPI Corp. from July 2008 to
July 2009. Mr. Feld received a BA in economics from Tufts University.
Manoj Gujral recently served as the Vice President and General Manager of the
Broadband and Consumer Division of Cavium, Inc., a high growth company
providing integrated processors for networking, storage, video, and security
applications, from April 2010 to June 2012, where he was responsible for
Business Strategy, Engineering Execution, Marketing and P&L functions with a
focus on Connected Home and Office segments. Mr. Gujral also served on the
board of directors of Virage Logic ("Virage"), a then publicly traded leading
provider of application optimized intellectual property (IP) platforms, from
May 2010 until Virage was acquired by Synopsys, Inc. in September 2010. From
2005 until April 2010, Mr. Gujral served as the General Manager of Platform
Business of NVIDIA Corporation ("NVIDIA"), which provides platform solutions
for Compute, Workstation, Visualization and Mobile markets. From 2003 to 2005,
Mr. Gujral served as Managing Director of the Specialty Interconnect Business
Unit at Cypress Semiconductor Corporation ("Cypress"), which delivers
high-performance, mixed-signal, programmable solutions that provide customers
with rapid time-to-market and exceptional system value, where he was
responsible for system interconnect products for wireless and handset markets.
Prior to Cypress, Mr. Gujral worked in various management roles at Raza
Foundries, Inc., ShareWave, Inc. and Unisys, including Vice President and
Director of Engineering, respectively. Mr. Gujral received his MSEE from
Oregon State University, MBA from San Jose State University and completed the
Executive Leadership Program at Stanford University Graduate School of
Business.
Cathal Phelan currently serves as Chief Executive Officer of a California
headquartered start-up company, a position he has held since November 2014.
Mr. Phelan also founded his own consulting firm Atticotti LLC ("Atticotti") in
April 2013, focusing on business strategies, IP management and
systems/semiconductor design. For the year prior to founding Atticotti, he
served as the Executive Vice President ("EVP") of the Consumer and Computation
Division of Cypress Semiconductor Corporation "Cypress"), a Silicon
Valley-based semiconductor design and manufacturing company. In multiple
stints with Cypress dating back to 1991, Mr. Phelan held the positions of
Chief Technical Officer, EVP of the Data communications Division, EVP of the
Personal Communications Division, Sr. Design & Architecture Director, Design
Manager and Memory Designer. From May 2006 to September 2008, Mr. Phelan was
away from Cypress and served as the Chief Executive Officer and President of
Ubicom, Inc., a venture capital backed startup focused on building a unique
media and communications processor for transporting digital content over the
home network. Mr. Phelan worked for six years at the Philips Research
Laboratories in Eindhoven, The Netherlands as a VLSI designer and Member of
Technical staff. Mr. Phelan served as a Director of Virage Logic Corporation
from March 2006 until it was acquired by Synopsys, Inc. in 2010. He also
serves as a Director at Touchstone Semiconductor, Inc. Mr. Phelan holds 38
U.S. patents. Mr. Phelan graduated from the Engineering School of Trinity
College at the University of Dublin in Ireland, where he received a Bachelor's
degree in Micro-Electronic Engineering and Mathematics in 1984 and
subsequently a Masters degree in Micro-Electronic Engineering in 1985.
Clifford Press has been a Managing Member of Oliver Press Partners, LLC, an
investment advisory firm and Oliver Press Investors, LLC since March 2005.
From 1986 to March 2003, Mr. Press served as a General Partner of Hyde Park
Holdings, Inc., a private equity investment firm ("HPH"). From March 2008 to
November 2009, Mr. Press served as a director and member of the Governance &
Nominating Committee of Coherent Inc., a manufacturer of laser based photonic
products. From December 2011 to February 2013, Mr. Press served as a director
and member of the Compensation Committee of SeaBright Holdings, Inc., a
holding company whose wholly-owned subsidiary, SeaBright Insurance Company,
operates as a specialty provider of multi-jurisdictional workers' compensation
insurance. Mr. Press received his MA degree from Oxford University and an MBA
degree from Harvard Business School.
Edward Terino is the President of GET Advisory Service LLC, a strategic and
financial management consulting firm focused on the technology and maritime
industries, a position he has held since March 2009. Mr. Terino is the founder
of Novium Learning, Inc., a start-up, privately-held, post-secondary
vocational education publishing company, which he founded in January 2011. Mr.
Terino currently serves on the Board of Directors of Baltic Trading Ltd., an
international dry bulk shipping company, a position he has held since March
2010, where he is Chairman of the Audit Committee and a member of the
Compensation Committee. Since July 2010, Mr. Terino has served as a director
of SeaChange International Inc., a digital video software company, where he is
Chairman of the Audit Committee and a member of the Compensation Committee.
From October 2012 through November 2013, Mr. Terino served as a director of
Extreme Networks, Inc., a network switching and services company, where he was
a member of the Audit Committee. Prior to that, Mr. Terino served as a
director of S1 Corporation, an internet banking and payments software company,
from April 2007 until February 2012, when S1 Corporation was acquired by ACI
Worldwide Inc. While at S1 Corporation, Mr. Terino served as Chairman of the
Audit Committee and a member of the Compensation Committee. Mr. Terino also
served as a director of Phoenix Technologies Ltd., a BIOS software company,
where he was Chairman of the Audit Committee and a member of the Compensation
Committee, from October 1999 to March 2006, Mr. Terino served as a director of
EBT International, Inc., a then publicly traded web content management
software company, where he was Chairman of the Audit Committee and a member of
the Compensation Committee. Mr. Terino also previously served as Chief
Executive Officer and Chief Financial Officer of Arlington Tankers Ltd., an
international seaborne transporter of crude oil and petroleum products, from
July 2005 until December 2008, when the company merged with General Maritime
Corporation. From September 2001 to June 2005, Mr. Terino was Senior Vice
President, Chief Financial Officer and Treasurer of Art Technology Group,
Inc., a then publicly traded eCommerce software company. Prior to 2001, Mr.
Terino held senior financial and operational management positions over a
15-year period with several publicly traded technology and educational
publishing companies. Mr. Terino began his career at Deloitte & Touche and
spent nine (9) years in their consulting services organization. Mr. Terino
earned a BS degree in Management from Northeastern University and an MBA from
Suffolk University.
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