Tessera Technologies, Inc. (NASDAQ: TSRA) (the "Company" or
"we") today delivered the following open letter to Starboard Value
LP (“Starboard”) from the Company’s Board of Directors:
Dear Mr. Feld:
We have clearly expressed our hope that we could avoid a
wasteful proxy contest. Indeed, we welcome an honest and forthright
discussion about the business case for or against the various
alternatives that are before us, and remain open to a reasonable
solution that balances Starboard’s rights as a 7% stockholder with
the other 93% of the Company’s stockholders, including those that
typically have a longer-term investment horizon than Starboard’s.
But in your private letter dated February 28, 2013, and your public
letter on March 1, 2013, you have crossed the line between a
business discussion and personal attacks, between a disagreement on
the merits and a campaign based on distortions.
Tessera’s Board Rejects Starboard’s “Private” Attempt at
Blackmail
The February 28 letter stated that, if the Board did not consent
to Starboard’s proposals, Starboard would “proceed with an election
contest to replace a majority of the Board” and, among other steps,
to “take appropriate actions” regarding “alleged activities” of the
Company’s chief executive officer Robert A. Young.
You provided zero factual basis for the letter’s allegation of
“possible improper conduct” by the CEO involving “an inappropriate
relationship with a female employee of the Company,” accompanied by
your demand that the Board conduct a “prompt and formal
investigation.” When Company counsel followed up by asking for
further information about this vague allegation, you had your
counsel, Mr. Steve Wolosky, state that Starboard would provide no
details whatsoever, and had no obligation to provide any
information on the matter.
Is it responsible to cry “fire” and then refuse to tell the
firemen where the fire is? Of course not. Starboard's “private”
letter was a transparent attempt to force the Board to fire Dr.
Young or else face the publication of that letter and its
allegations. But neither the Board nor Dr. Young is prepared to be
blackmailed into a course of action by Starboard that is not in the
best interests of stockholders of the Company by threats of
publishing unfounded and scurrilous accusations. The Board asks
that you promptly either provide details that would enable us to
follow up via our established processes or else withdraw the
allegations.
In the meantime please note that the Board unanimously stands
behind our CEO Dr. Young.
Starboard’s Unreasonable Demands
While holding roughly 7% of the Company’s shares outstanding,
you demand the removal of the CEO and Board Chairman, as well as a
majority of board seats – essentially demanding the same control a
majority owner would have, but without paying a control premium.
Specifically, the private letter demands
- the Company immediately appoint at
least five of your nominees to the Board;
- that a “direct representative” of
Starboard be among the new Board members (at the February 27, 2013,
meeting with two of our independent Directors you stated that you
would be that representative);
- two incumbent directors resign
immediately, including the Chairman of the Board, Robert
Boehlke;
- a new independent Chairman of the Board
be elected by the new Board to succeed Mr. Boehlke; and
- Dr. Young resign as the Company’s chief
executive officer and as a member of the Board following the
completion of a search for his successor.
Significantly, and in stark contrast to your private letter,
your public letter omits your demands for the resignation of our
Chairman, the resignation of our CEO, and the resignations of two
additional board members.
During the meeting with Starboard on February 27, 2013, the
Board’s independent directors reiterated the Company’s desire to
avoid a wasteful proxy contest. They again asked to interview four
of Starboard’s seven nominees: Tudor Brown, George Cwynar, George
Riedel, and Don Stout. The directors said, and we reiterate today,
that the Board’s Nominating Committee remains open to adding two
candidates from Starboard’s slate that meet the Company’s criteria,
including independence and business acumen. Importantly, a board
composed in this manner would have a majority of its members
appointed since August 2011. You rebuffed these requests – making
it very clear that you have no intention to “avoid an election
contest,” as claimed elsewhere.
Starboard’s Conflict of Interest
As you know, we remain concerned that the appointment of
Starboard executives to our Board will present a conflict of
interest. Starboard is involved with other competing intellectual
property businesses, including Unwired Planet, Inc., which you
chair, and which has interests that may compete with the Company’s
strategic plans for its Intellectual Property business. Because you
are saddled with these conflicts, your proposal to appoint yourself
to the Tessera Board runs afoul of both corporate “best practices”
and ISS policies.
No Business Plan from Starboard
In your two letters and during our meeting, you failed to
identify credible plans for the operations of the business, or a
replacement CEO, or for creation of value. Although you have
promised to provide plans following the filing of your proxy
materials, so far, your communications have consisted of demands,
accusations and distortions. As we are sure you recognize, it is
important for the stockholders who own the other 93% of the
Company’s shares to understand your plans for the Company, given
your stated desire to take over a majority of the board.
Response to Public Letter of March 1, 2013
The Company continues to take significant and strong actions to
increase long term stockholder value.
- We have announced significant cost
reduction initiatives in November 2012 and February 2013.
- Our DigitalOptics business continues to
have a unique opportunity to enter a market already measured in
billions of units with superior industry-changing technology.
Continued, measured investment in pursuit of this opportunity is
highly appropriate.
- Our Intellectual Property business
continues to perform well, as reflected in the recent signing of
two eight-year licenses by SK hynix Inc. and the Amkor arbitration
award announced in February 2013, which we estimate will result in
revenue in excess of $130 million in due course.
- Our investments in R&D compare very
favorably to similarly successful technology-based patent
monetization companies, and are necessary to maintain long term
running royalty revenues.
- In addition, aggressive litigation
spending is a critical component of the Company’s “strong patent
position.”
- We implemented a quarterly dividend for
the first time in the company’s history in March 2012, and
continually evaluate other ways to return stockholder capital.
Increasing the Strength of the Board
We firmly believe that the judgment of an independent and highly
qualified Board will be crucial to the Company’s success,
particularly in the coming year as we evaluate the investments in
and opportunities of its DigitalOptics and Intellectual Property
businesses. We believe the Company and its stockholders will be
best served by directors that can exercise independent judgment as
they represent stockholders’ diverse interests. To that end, we
have appointed three independent directors since August 2011, and
we are actively seeking new independent directors, which would
result in a majority of the Board having “fresh eyes.”
The Board is currently evaluating potential candidates, and
reiterates that it would like to include Starboard’s nominees in
that process. We are committed to ensuring that all members of the
Board possess fundamental qualities of intelligence, honesty, good
judgment, high ethics and standards of integrity, fairness and
responsibility, and that they possess independence and specific
technological and management expertise in the Company's areas of
operations.
Summary
It is unfortunate that Starboard has chosen to overreach in this
situation, but in doing so it has shown its true colors.
Starboard
- complains that changes in Tessera
management and board membership have led to chaos, but demands
rapid and thoroughgoing changes in both, without identifying a
business plan or leader,
- seeks majority control while holding a
7% ownership stake, and
- threatens reputations while refusing to
back up its allegations of personal misconduct.
We believe these tactics reveal an unsound approach to operating
a public company, a self-serving plan for overrepresentation, and
questionable judgment in general.
The Board of Directors, Tessera Technologies, Inc.
Safe Harbor Statement
This document contains forward-looking statements, which are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements involve risks and uncertainties that could cause actual
results to differ significantly from those projected, particularly
with respect to future revenues, including from the Amkor
arbitration award, levels of research, development and other
related costs and expenditures, the outcome or effects of and
expenses related to litigation and administrative proceedings
related to the Company’s patents, and the Company’s business
opportunities, market acceptance of its products and
industry-changing technologies. Material factors that may cause
results to differ from the statements made include the plans or
operations relating to the Company's businesses; market or industry
conditions; changes in patent laws, regulation or enforcement, or
other factors that might affect the Company’s ability to protect or
realize the value of its intellectual property; the expiration of
license agreements and the cessation of related royalty income; the
failure, inability or refusal of licensees to pay royalties;
initiation, delays, setbacks or losses relating to the Company’s
intellectual property or intellectual property litigations, or
invalidation or limitation of key patents; the timing and results,
which are not predictable and may vary in any individual
proceeding, of any ICC ruling or award, including in the Amkor
arbitration; fluctuations in operating results due to the timing of
new license agreements and royalties, or due to legal costs; the
risk of a decline in demand for semiconductor and camera module
products; failure by the industry to use technologies covered by
the Company’s patents; the expiration of the Company’s patents; the
Company’s ability to successfully complete and integrate
acquisitions of businesses, including the integration by
DigitalOptics Corporation (“DOC”) of its recently acquired camera
module manufacturing facility in Zhuhai, China; the risk of loss
of, or decreases in production orders from, customers of acquired
businesses; financial and regulatory risks associated with the
international nature of the Company’s businesses; failure of the
Company’s products to achieve technological feasibility or
profitability; failure to successfully commercialize the Company’s
products; changes in demand for the products of the Company’s
customers; limited opportunities to license technologies and sell
products due to high concentration in the markets for
semiconductors and related products and camera modules; the impact
of competing technologies on the demand for the Company’s
technologies and products; failure by DOC to become a vertically
integrated camera module supplier; and the reliance on a limited
number of suppliers for the components used in the manufacture of
DOC products. You are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this
release. The Company's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year
ended Dec. 31, 2012, include more information about factors that
could affect the Company's financial results. The Company assumes
no obligation to update information contained in this press
release. Although this release may remain available on the
Company's website or elsewhere, its continued availability does not
indicate that the Company is reaffirming or confirming any of the
information contained herein.
About Tessera Technologies, Inc.
Tessera Technologies, Inc. is a holding company with operating
subsidiaries in two segments: Intellectual Property and
DigitalOptics. Our Intellectual Property segment, managed by
Tessera Intellectual Property Corp., generates revenue from
manufacturers and other implementers that use our technology. Our
DigitalOptics business delivers innovation in imaging systems for
smartphones. For more information call 1.408.321.6000 or visit
www.tessera.com.
Tessera, the Tessera logo, DOC, the DOC logo, and Invensas
Corporation are trademarks or registered trademarks of affiliated
companies of Tessera Technologies, Inc. in the United States and
other countries. All other company, brand and product names may be
trademarks or registered trademarks of their respective
companies.
Additional Information and Where to Find It
Tessera Technologies, Inc. (the “Company”), its directors and
certain executive officers and employees may become participants in
the solicitation of proxies from stockholders in connection with
the Company’s 2013 Annual Meeting of Stockholders (the “Annual
Meeting”). The Company plans to file a proxy statement with the
Securities and Exchange Commission (the “SEC”) in connection with
the solicitation of proxies for the Annual Meeting (the “2013 Proxy
Statement”).
Robert J. Boehlke, Richard S. Hill, David C. Nagel, Timothy J.
Stultz, Anthony J. Tether, and Robert A. Young, all of whom are
members of the Company’s Board of Directors, and C. Richard Neely,
Jr., Executive Vice President and Chief Financial Officer, Bernard
J. Cassidy, Executive Vice President, General Counsel and Secretary
and Moriah C. Shilton, Senior Director, Investor Relations, may
become participants in the Company’s solicitation. Information
regarding the Company’s directors’ and executive officers’
respective interests in the Company by security holdings or
otherwise is set forth in the Company’s proxy statement relating to
the 2012 annual meeting of stockholders. No other participants own
in excess of 1% of the Company’s common stock. Additional
information regarding the interests of such participants will be
included in the 2013 Proxy Statement and other relevant documents
to be filed with the SEC in connection with the Annual Meeting.
Promptly after filing its definitive 2013 Proxy Statement with
the SEC, the Company will mail the definitive 2013 Proxy Statement
and a proxy card to each stockholder entitled to vote at the Annual
Meeting. STOCKHOLDERS ARE URGED TO READ THE 2013 PROXY STATEMENT
(INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER
RELEVANT DOCUMENTS THAT THE COMPANY WILL FILE WITH THE SEC WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Stockholders may obtain, free of charge, copies of the
definitive 2013 Proxy Statement and any other documents filed by
the Company with the SEC in connection with the Annual Meeting at
the SEC’s website (http://www.sec.gov), at the Company’s website
(http://ir.tessera.com/sec.cfm) or by writing to the Secretary,
Tessera Technologies, Inc., 3025 Orchard Parkway, San Jose,
California 95134.
TSRA-G
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