Emulex Corporation (NYSE:ELX), a provider of data networks, is under the eyes of two noted U.S.-based activist investors these days. Paul Singer’s Elliott Management has a 10 percent position, whereas Jeffrey Smith from Starboard Value has a 7.9 percent stake in Emulex, updated last week as per a 13D/A filing. Today Emulex made two major announcements, one of which was that its CFO, Michael J. Rockenbach, has resigned from the company, effective December 31. Rockenbach has been with Emulex since 1991 and has held the position of Chief Financial Officer since 1997.
Emulex also extends standstill with Elliott
Emulex Corporation (NYSE:ELX) also said in its press release that the standstill agreement between Elliott and the company, which was set to expire today, has been extended through October 20 of this year. Emulex and Elliott have been in a standstill deal since March of this year.
Just this week, Jeffrey Smith said in a letter to Emulex’s board that the company needed a change in its top executives and also was in dire need of more structural reforms. Smith also conveyed his disppointment with the continuing presence of Jim McCluney, ex-CEO of Emulex, in the company’s board. In July, Jeff Benck replaced Jim McCluney as the CEO of Emulex, however, McCluney remains on the board as executive chairman.
In the letter, he also noted that Emulex Corporation (NYSE:ELX) was down 40 percent on July 2, from the $11/share all-cash bid that was put up by Broadcom Corporation (NASDAQ:BRCM) back in 2009. Emulex has not reported a financial profit in three years.
24 percent of Emulex owned by activist hedge funds
In a research note from Aaron C. Rakers of Stifel, Rakers reiterated that the involvement of activist hedge funds is a positive for the company. He pointed out that in addition to Elliott and Starboard’s positions, Altai Capital Management also has a 6 percent position in the company. Altai’s position is also an active stake, and the fund has in the past written strongly worded letters to the company. So in between these hedge funds, 24 percent of Emulex’ shares are held by activists who all seem in agreement on what the company should do to increase shareholder value.
New announcements from Emulex a positive: Stifel
Rakers also noted that the change of CFO bodes well for any future changes in leadership and the extension in the standstill agreement between Elliott and Emulex is also a positive, he wrote,
While a more meaningful push by Elliot/others appears to be pushed out by 30-days (e.g., nominations to the company’s board), we believe investors should consider today’s standstill extension and CFO announcement as related and a positive.
Stifel has a price target of $11.39 on Emulex Corporation (NYSE:ELX) and rates it at Hold. Shares of Emulex are up 2 percent today on these new announcements.