An investment company with a track record of packaging distressed technology companies for sale revealed it has accumulated a significant minority stake in Marvell Technology.
Starboard Value filed a 13-D form notifying the Securities and Exchange Commission (SEC) that it now owns 6.7% of Marvell Technology Group Ltd. (Nasdaq: MRVL)'s stock, or over 34 million shares. The document notes that the investors also own options for additional stock. At the beginning of the year, Marvell's stock was trading in the $16 range. In recent months, it has been hovering around $9.
Starboard said in the 13-D that it believes Marvell's stock is undervalued and "represented an attractive investment opportunity." Starboard has no legal obligation to disclose its intentions, and it didn't. The document includes boilerplate language that says Starboard has the option to sell its interest in Marvell or increase its holdings in the company.
As early as 2014, Marvell was under pressure because of mounting losses in one of its key product lines, chips for mobile phones. But then in summer 2015 it revealed accounting regularities it is still sorting through. The company has yet to file its Q3 2015 earnings report (the company's fiscal year aligns with the calendar year). In December, it negotiated an extension with Nasdaq to file its Q3 report by March. (See Marvell to Exit Smartphone Biz.)
Starboard is known for following the dissident investor playbook: buy a minority stake, agitate for selling off operations or the entire company and place board members to make a sale happen.
They've done it with: AOL Inc. (NYSE: AOL), (purchased by Verizon Communications Inc. (NYSE: VZ)); Actel Corp. , (purchased by Microsemi Corp. ); Integrated Device Technology Inc. (IDT) (Nasdaq: IDTI), Integrated Silicon Solution Inc. (Nasdaq: ISSI) (acquired by Uphill investment, but not before Starboard complained that ISSI should have solicited a bid from Cypress Semiconductor Corp. (NYSE: CY)); SeaChange International Inc. (Nasdaq: SEAC) and recently Yahoo Inc. (Nasdaq: YHOO). In this recent letter to the board of Yahoo, the people running Starboard are entertainingly bumptious in asserting that not selling Alibaba Group was the right thing to do but complaining that Yahoo didn't sell Alibaba anyway. (See Marissa Mayer & the Terrible, Horrible Day.)
Though Starboard hasn't said anything specifically about what it wants Marvell to do, Starboard's past behavior should be instructive. Plus, the advisers it has enlisted all have extensive semiconductor experience, suggesting active meddling is a near certainty.
Oleg Khaykin, the former CEO of International Rectifier -- who coincidentally just yesterday was named CEO of Viavi Solutions Inc. -- is cited in Starboard's 13-D as an adviser to Starboard and a participant in the purchase of Marvell stock. Richard Hill, currently chairman of the board of Tessera Technologies and formerly the chairman and CTO of Novellus, is on board, as is Jeffrey McCreary, an industry veteran who held senior positions at Integrated Device Technology (IDT) and Texas Instruments. He is currently an independent management consultant and a member of the board of directors of Isola Group. (See Former Int'l Rectifier CEO to Head Viavi.)
Marvell's only public response, filed with the SEC, reads:
"Marvell regularly engages with our shareholders to understand their perspectives on the company and on our long-term growth strategy, and we welcome all constructive input. We will carefully review any suggestions Starboard or their advisers may have, as we would with any other shareholder.
"As always, Marvell is committed to acting in the best interests of the company and all of our shareholders, and we are focused on continuing to leverage our expertise in semiconductor devices to drive growth across our end markets. We are focused on executing our strategy as our Audit Committee is moving toward completion of the previously disclosed independent investigation of certain accounting and internal control matters and we progress toward regaining compliance with our SEC reporting obligations. The Board of Directors has engaged international executive search firms to conduct searches for additional board members and a permanent Chief Financial Officer. In 2016, we will continue to focus on delivering more great products and solutions to customers and value to shareholders."
— Brian Santo, Senior Editor, Components, T&M, Light Reading