As Starboard Value LP launches its latest activist campaign at Integrated Silicon Solutions Inc. (ISSI) the New York-based hedge fund could eventually push for a sale of the semiconductor manufacturer.
However, potential buyers may be scarce in the near term, as consolidation takes out likely acquisition candidates, industry observers said.
On Friday, Starboard disclosed a 7.2% stake in Integrated Silicon. Along with fellow hedge fund Oliver Press Partners LLC, of New York, the activists hold an 8% stake in the chip maker.
The investors also said the intended to nominate five director candidates for the company's board.
On Monday, the activists followed up with a letter to the company's board and its CEO and president Scott Howarth.
Starboard managing member Peter Feld and Oliver Press managing member Clifford Press said in their letter that ISSI is trading at a substantial discount to its peers partly because of its non-core acquisitions and that it should focus on profitable and growing core businesses.
"ISSI has carved out a strong niche selling specialty memory products — DRAM and SRAM — to the auto and industrial markets," they said, adding that the business now comprises about 75% of the company's revenue and is a growing, profitable one.
The duo also said the current board structure is "highly unusual and not in line with best practices."
There could be potential conflicts of interest, Feld and Press pointed, because the vice chairman of the board is also the company's executive vice president reporting to the CEO, but the CEO also has to report to the board.