Zoran Corp. (Nasdaq: ZRAN) founder, president and CEO Dr. Levy Gerzberg may have reason to worry. US equity fund Ramius LLC unit Ramius Value and Opportunity Advisors LLC, which owns 8.3% of Zoran, is making the noises of institutional activism.
In a letter to Gerzburg and Zoran's board of directors, Ramius says that it believes that Zoran's shares are deeply undervalued and that such valuation discrepancy is primarily due to long-term fundamental underperformance and repeated missed expectations for revenue growth and profitability.
Ramius partner managing director Jeffrey Smith said, "Zoran has dramatically underperformed the Russell 2000, Nasdaq, and its peer group over almost any measurement period, with its shares losing more than half their value over the past five years alone. This substantial underperformance has been largely driven by the company's unwavering commitment to fund heavy losses in the unprofitable and structurally challenged digital television (DTV) and DVD business. The ongoing losses and cash burn from these businesses have resulted in the public market attributing almost no value to Zoran's operating business."
Ramius says that it is necessary to change the composition of Zoran's board of directors so that it will represent the interests of all shareholders. Ramius has filed a preliminary consent solicitation with the US Securities and Exchange Commission (SEC) to seek shareholder support to remove and replace six members of Zoran's current board with highly qualified director candidates.
Smith added, "Shareholders cannot sit idly by and continue to allow the management team and board to destroy shareholder value by spending good money after bad in pursuit of elusive revenue growth that may never result in improved profitability. Our only way to ensure that immediate steps are taken to restore credibility and enhance shareholder value at Zoran is to reconstitute the Board with directors who are committed to a course of action that will return Zoran to an acceptable level of profitability."
Smith is one of the candidate directors that Ramius is proposing for Zoran's board of directors.
Zoran's chairman is veteran high-tech entrepreneur Uziel Galil. Gerzberg is also a company director.
Zoran's share price rose 4.3% yesterday to $8.03, giving a market cap of $403 million.
Published by Globes [online], Israel business news - www.globes-online.com - on December 7, 2010
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