NEW YORK (The Deal) -- A package of changes offered by Oplink Communications (OPLK) earlier this week including a strategic review of a key business unit weren't enough to mollify two dissident investors at the optical networking company.
The activists, Engaged Capital LLC and Voce Capital Management LLC, late Thursday launched a proxy contest to seat two of their nominees on the company's board.
Fremont, Calif.-based Oplink on Tuesday said it would consider selling its Oplink Connected unit, something the activists had been seeking, and retained Cowen and Company LLC as financial adviser for the review.
It also authorized a $40 million increase to its existing share repurchase program and a new $0.05 quarterly dividend. Both dissidents, who own 6.2% of Oplink, had been pressing for stock buybacks. In addition, Oplink said it plans to expand its board by adding up to two more directors "with relevant business experience."
However, Voce Capital managing partner J. Daniel Plants said by telephone Thursday that Oplink's announcements leave open the possibility little will change at the company.
Plants said he was concerned that Oplink might fail to consummate the divestiture of the Oplink Connected business or might attempt to structure a transaction whereby Oplink shareholders continued to underwrite the division. The hedge fund manager said the division had been unprofitable and isn't expected by analysts to generate any returns for another five to ten years.
Analysts have said that Oplink's CEO Joe Liu may consider spinning off or selling 50.1% of the Oplink Connected unit, which makes home security video surveillance and mobile alert products. However, the activists want Oplink to focus solely on its optical networking business and not allocate any capital to the unit.