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Ex-CEO looks back at IDT hedge scuffle

Posted: 10 May 2016     Print Version  Bookmark and Share

Keywords:IDT  MaxLinear  activist investor  Starboard Value  semiconductor 

EE Times: You had never heard of Starboard, then?

Tewksbury: I was a little naive, but this was late 2011, well before activist investors' interest in chip companies became so obvious.

Anyway, the CFO explained that he had met with Jeffrey Smith from Starboard. And the CFO said, 'I saw a man with no soul in his eye.'

Soon after that, we received a letter from Peter Feld [managing member and head of research at Starboard.] It was a polite letter suggesting that we should meet. So we had our first meeting in San Jose.

EE Times: How did the meeting go?

Tewksbury: We laid out our philosophy. In my view, companies become successful by building on their own core competency, in our case, it was our timing [devices]. But companies also need to invest in the future. The Starboard guys, however, pretty much told us that we were wasting our time with power management, wireless charging and RF. 'You should focus, stick to your own knitting,' they told us.

Jeffrey Smith

Figure 3: Jeffrey Smith

After the first meeting, they sent a letter to the board at IDT.

EE Times: What did you know about hedge fund investors then? What did you think would happen next?

Tewksbury: I knew little. At that time, I had no real knowledge or understanding of their power. As in earlier instances, I kept thinking that we were doing the right thing and the board would be with us.

But then, bankers took it seriously (it's their job and that's how they make money). After the 13D* was filed [in April 2012], things rapidly escalated. [*A 13D is a filing required by the U.S. Securities and Exchange Commission within 10 days by anyone who acquires beneficial ownership of more than 5% of any class of publicly traded securities in a public company.]

I wanted to fight, because I was so confident with my strategy.

The activist spotlight

Figure 4: Report on 13D filings that appeared on Barrons, April 28, 2012

EE Times: But the board wasn't with you?

Tewksbury: No. The board's job is to do risk assessment and audit the CEO. To be a visionary isn't their job. Starboard allied themselves with the board and they succeeded in getting three seats. They [hedge fund investors] have one mission: maximise profit and boost stock price in a 15-18 month window. Even though they portray themselves as champions of all shareholders, they're not. They only look after their own interest [via short-term gains].

EE Times: So three new directors recommended by Starboard joined IDT's board in June 2012.

Peter Feld

They included Peter Feld and Jeffrey McCreary. What happened then?

Tewksbury: They implemented their playbook. You know what's in it. They come in, cut R&D, sell out future products, sell pieces of the company or the whole company. In short, they wreak havoc.

EE Times: But Starboard didn't take you out of IDT right away. You actually stayed there for more than a year. It took until August 2013, when you submitted an abrupt resignation. McCreary then became interim CEO. You actually fought against Starboard for almost a year and half. That was unusual.

Tewksbury: Yes. In the case of Marvell, Starboard took out the CEO as soon as possible. Earlier this week, Richard Hill [from Starboard]* was appointed as the chair of Marvell. [*Peter Feld and Oleg Khaykin are the other two directors that Marvell added to its board.]

When Starboard came into IDT, what they didn't anticipate was that I was going to fight. I fought to keep wireless charging (which was still a nascent market then), RF and RapidIO. I knew the timing business was fine, but I also knew we needed to invest in new segments to grow in the future.

Succeeding in fight

EE Times: Did you succeed in keeping those new product lines?

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