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
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.
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.”
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.
letter was a transparent attempt to force the Board to fire Dr. Young or
else face the publication of that letter and its allegations.
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
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.
the private letter demands
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
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.
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
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
Response to Public Letter of March 1, 2013
The Company continues to take significant and strong actions to
increase long term stockholder value.
the Company immediately appoint at least five of your nominees to
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
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.
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
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
It is unfortunate that Starboard has chosen to overreach in this
situation, but in doing so it has shown its true colors.
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
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.
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
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
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.