| Jeffrey Smith, Starboard Value (Bloomberg) |
Jeffrey Smith’s Starboard Value has disclosed its newest activist target.
The New York hedge fund firm said Wednesday that it owns 6.7 percent of Marvell Technology Group, the struggling semiconductor maker.
In a regulatory filing, Starboard said the stock is undervalued. It added that it retained three technology experts as senior advisers and is paying each of them $25,000, which they will use to buy shares of Marvell.
These three individuals are not exactly random experts recommended by some consulting firm. Rather, their involvement in Starboard’s Marvell mission underscores the professional incest that often pervades activist campaigns.
For example, one of the three is Richard (Rick) Hill, the former chairman and chief executive officer of Novellus Systems. He has also served as chairman of Tessera Technologies, which just so happens to be a onetime successful activist target of Starboard.
Hill was brought in as a director of semiconductor maker Tessera in August 2012 and later named interim CEO and executive chairman. Hill replaced CEO Robert Young, who, Tessera announced in a press release at the time, decided to step down “in the best interest of the company.” In other words, he was pressured to leave.
In May 2013, Starboard won six seats on the board as part of a compromise deal before the annual meeting, the culmination of a two-year struggle with the company.
In 2014, Tessera’s then–chief financial officer was named to the board of directors of another Starboard target, storage system company Quantum Corp.
Another adviser on the Marvell investment is Jeffrey McCreary, who recently served as a director of Integrated Device Technology, another onetime Starboard activist target. In fact, as part of a settlement in 2012, IDT agreed to name to its board two individuals recommended by Starboard: Peter Feld, a Starboard portfolio manager, and McCreary, a director of MIPS Technologies.
MIPs, in turn, was an even earlier Starboard target that agreed to nominate to its board two new directors recommended by Starboard.
See the pattern?
What about the third technology expert brought in by Starboard?
He is Oleg Khaykin, who recently served as president, CEO and director of International Rectifier Corp., a maker of power semiconductors. He had taken over the helm in 2008 after the company restated its financials and stayed until Infineon Technologies acquired International Rectifier, in 2015.
Khaykin does not appear to have an earlier Smith or Starboard connection.
Starboard is not exactly the first activist to take a look at Marvell.
The stock had been a big favorite of David Einhorn’s Greenlight Capital for several years, especially in 2014 when the shares were regularly among the hedge fund firm’s top five holdings. In the third quarter of 2014, Greenlight was the largest shareholder of Marvell.
However, Greenlight started aggressively selling the stock in the first quarter of 2015 and unloaded its remaining position in the June period. In its second-quarter 2015 letter, Greenlight said it enjoyed a 15 percent compounded return even though the company “repeatedly fell short of expectations.”
Good timing. In August, Marvell postponed the release of its second-quarter results. Then in September it reported a loss for the period. The company also disclosed that its audit committee was investigating certain accounting issues, including revenue-recognition matters, “and any associated issues with whether senior management’s operating style during the period resulted in an open flow of information and communication to set an appropriate tone for an effective control environment.”
The stock has fallen some 34 percent since the end of the second quarter of 2015, until the day before Starboard disclosed its stake, and down even more from its high earlier in that quarter.
Now let’s see what Smith does to help the stock rebound with, no doubt, a little help from his friends.
