Violin Memory's top dog snubs activist investors Clinton Group
CEO says board has the right commitment and experience
Violin Memory's CEO has given the company's board a public pat on the back, snubbing activist investors as he does so.
After the Clinton Group letter putting Violin's board on notice to sell the company well before the June AGM, threatening to put up three of its own nominees for board seats, Violin has issued a statement implying the Clinton Group nominees will add nothing to the board.
Kevin DeNuccio, president and CEO of Violin, said:
Violin’s management team and board collectively own six per cent of the company and are aligned with our shareholders in our desire to create value for the company. We are focused on improving our execution and completing our product transition to the Flash Storage Platform, while also pursuing strategic alternatives to accelerate our opportunity.
Our Board of Directors currently consist of 6 current or former CEO/COOs and senior executives from storage industry legacy leaders from IBM, NetApp, and 3Par, which provide critical leadership to create value for all of our stakeholders.
The Violin board, which is financially committed to Violin, currently has nine members:
- Richard Nottenburg, chairman and an ex-CEO
- Gerges Antoun, ex-COO at First Solar and formerly of Ericsson and Redback Networks
- Cheemin Bo-Linn, ex-IBM VP and storage systems executive
- Kevin DeNuccio, ex-CEO at Redback and a one-time Cisco man
- William Kurtz, an ex-CFO of Bloom Energy, Novellus Systems, Engenio and 3PAR
- Larry Lang, ex-CEO Quorum Labs and with a Cisco VP-ship in his CV
- Donald Listwin, ex-CEO Canary Foundation non-profit, Sana Security and Openwave Systems and an ex-VP at Cisco, with Isilon and Redback board experience
- Vivekanand Mahadevan, ex-CEO of Dev Solutions consulting firm and ex-chief strategy officer at NetApp and VP marketing at LSI
- David Walrod, ex-general partner at Oak Investment Partners (a VC firm) and McKinsey guy
The Clinton Group's nominees, for comparison, are:
- Ralph Schmitt, ex-CEO of various technology companies, a turnaround guy, who led sale of OCZ Technology to Toshiba, and is still OCZ's chief exec
- Michael Wall, ex-CEO of various tech companies, called a turnaround guy and who led the sale of Amplidata to WDC's HGST unit
- Alex Spiro, an attorney and faculty member of Harvard Law School, and Imation board member
The current Violin board has not been able to spur a renaissance at the company, despite its collective experience and wisdom. DeNuccio's statement, particularly this sentence – "We are focused on improving our execution and completing our product transition to the Flash Storage Platform, while also pursuing strategic alternatives to accelerate our opportunity" – implies that pursuing strategic alternatives is a secondary focus.
The big weaknesses in this position are the falling revenues and failure to meet Wall Street expectations quarter by consecutive quarter, despite DeNuccio and his team being brought in to rescue the company from its post-IPO problems. The Clinton Group can point to this multi-quarter failure in any appeal it makes to investors when soliciting support, and assert that DeNuccio and his team have presided over value destruction at Violin.
It could also point out that Violin lacks a proven heavy-hitter in charge of sales.
The Violin board does not have strong counters to these three potential Clinton Group accusations. All it can do, pretty much, is make an appeal to faith and, indirectly maybe, say the Clinton Group is out for short-term gains.
In El Reg's view, that line would be right, the Clinton Group not being interested in seeing Violin recover its business over the next 18-24 months. It wants a faster return on its investment in Violin than that. We might imagine it could use spare cash at Imation to buy more Violin shares, now trading at $0.71, and so put a little more pressure on the company to bend to its will. This could get messy. ®