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Mellon Pushes for CoSine Sale

CoSine Communications Inc.'s (Nasdaq: COSN) largest shareholder, a Mellon Bank subsidiary, is pushing the company's board to put CoSine up for sale. An April 1 letter sent to CoSine's directors by Mellon HBV Alternative Strategies LLC, criticizes the current management and says the board should act quickly to preserve CoSine's "instrinsic value."

A copy of the letter, signed by Mellon HBV's chief investment officer William Harley III, is found in CoSine's latest filing with the Securities and Exchange Commission (SEC).

"We therefore view the pursuit of an outright sale of the company as the best course of action. We call for the board of directors to hire a financial advisor for the purpose of selling the company," the letter states. "We believe that this represents the best opportunity for capitalizing on CoSine's superior technology, enhancing revenue growth, and closing the gap between the company's intrinsic value and its current share price."

"The longer the board of directors waits to take action, the more the cash burn will erode the value of the company."

Mellon HBV also took issue with the loans CoSine has granted its officers and other employees, saying the board "exercised feeble judgment" in forgiving "$24 million over the past two years."

This makes the second time in just a few months that an investment group has pushed for CoSine's sale. Late in 2002, CoSine rejected at least two buyout offers from Wyndcrest Holdings LLC, a Florida-based venture firm focused on investments in technology and digital entertainment (see Floridians Bid for CoSine and CoSine Rejects Takeover Bid).

But Mellon HBV's letter might not be taken so lightly, since the outfit owns 557,192 shares, or 5.6 percent of CoSine, making it the company's largest institutional shareholder. "We do not consider ourselves activists, but reserve the right to actively pursue changes to the board if our concerns are not addressed in a timely manner," Mellon HBV's letter says.

CoSine did not immediately return calls seeking comment on Wednesday afternoon.

— Phil Harvey, Senior Editor, Light Reading

dogmeat 12/5/2012 | 12:18:54 AM
re: Mellon Pushes for CoSine Sale Cosine executives know that this is the last ride like this they will ever be on. They goal is to ride this puppy into the ground and walk away when the bank account is empty...

So, good luck Mellon. Taking the cash in the bank account and distributing back to shareholders would be a merciful end to this. With the list of solid Tier-1's that Cosine has on it's customer list, you'd think they could give the technology and engineering team to a healthier company for a $1 after the bank account has been distributed. It's over for the technology unless it's part of a larger portfolio of products in a healthy company.

Then good old Cosine will have no money, no products, no employees, and $40 million in Real Estate liabilities to be wiped out in a nice sweet Chapter 7 liquidation. Mellon, we wish you well, a majority revolt shareholder revolt is the only way to do this. Call Dean Hamilton and see if he'll participate in killing his creation!! He's got the shares (or used to).

BobbyMax 12/5/2012 | 12:18:52 AM
re: Mellon Pushes for CoSine Sale Giving $24 million dollars in loan to CoSine employees and subsequently forgiving this loan is an example of corruption that goes very frequently in California. Most of the companies have similar products which are almost identical.

The start-ups keep getting VC money. Yjey usually keep the mpney for themselves and fite the workers. The VCs are also very careless in distrubuting money to the start-ups (like giving money to charity of your choice). VCs usually make about 10-12% commission on the money that was handed over to the start-ups.
tiadakola 12/5/2012 | 12:18:44 AM
re: Mellon Pushes for CoSine Sale Booby,

You shouldn't wake up out of a deep sleep and grab your keyboard...you make even less sense than usual...or is 3:21 am the time you get back from the bowling alley?
sp1g0t 12/5/2012 | 12:18:42 AM
re: Mellon Pushes for CoSine Sale I have always wondered how Bobby is able to so clearly articulate the vast nuances of startup financing and how his insights are always so remarkably prescient.

I don't know how I could have missed it. It's obvious - he's a VC!!!!!
crapshooter 12/5/2012 | 12:18:29 AM
re: Mellon Pushes for CoSine Sale Boobie wrote:

The start-ups keep getting VC money. Yjey usually keep the mpney for themselves and fite the workers. The VCs are also very careless in distrubuting money to the start-ups (like giving money to charity of your choice). VCs usually make about 10-12% commission on the money that was handed over to the start-ups.

>>>>>>>>>>>>>>>>

I really have to know: does this stuff at least make sense in your head, or is it already F**ked up at the beginning of the thought process?
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