Emulex Chairman to Leave Board in Deal With Shareholders
Emulex Corp. (ELX), facing pressure from activist shareholders over its board makeup and financial discipline, said it will buy back about 30 percent of its stock and Executive Chairman James McCluney will step down.
McCluney, a former Emulex chief executive officer, will remain with the company through Feb. 6 and won’t seek re-election, the company said in a statement yesterday. Emulex is also interviewing candidates to fill three independent seats on the board, which will be reduced to 11 from 12 members. The company didn’t say which current directors would be replaced.
A $200 million share buyback will begin immediately, and Emulex said it’s planning to cut $30 million in annual expenses by fiscal 2015 by reducing its number of products and eliminating “lower return on investment programs,” without providing details. Separately, the company announced plans to offer as much as $125 million in convertible senior notes.
Emulex, based in Costa Mesa, California, sells chips that help computer servers and storage networks transfer data. It hasn’t reported an annual profit since 2010. Activist investment companies Starboard Value LP and Elliott Management Corp. have taken stakes in Emulex and criticized its management in recent months, lobbying for changes to the board and a new strategy.
“I think that we’re taking the right steps,” CEO Jeff Benck, who succeeded McCluney in July and has been with the company since 2008, said in an interview. “I didn’t want to run the same playbook that we’d been running.”
“The meaningful cost reduction initiatives, the plan to return significant capital to shareholders and the board transformation at Emulex are all positive steps,” Jesse Cohn, a fund manager at Elliott Management, said in yesterday’s statement. The investment company reviewed the plans announced yesterday before they were made public, Cohn said.
In September, the company said Chief Financial Officer Michael J. Rockenbach would leave at year’s end. In 2009, Emulex rejected an $11-a-share bid from Broadcom Corp. (BRCM), saying the offer undervalued the company.
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