- ENGAGED CAPITAL’S NOMINEES HAVE
CLEAR RECORDS OF VALUE DESTRUCTION
- ENGAGED CAPITAL HAS NO PLAN TO
CREATE VALUE FOR ROVI
- ROVI HAS THE RIGHT PLAN IN PLACE TO
DELIVER STOCKHOLDER VALUE
- ROVI’S BOARD CONTINUES TO TAKE
DECISIVE ACTION BASED ON STOCKHOLDER FEEDBACK
Rovi Corporation (NASDAQ:ROVI) today issued the following
letter to all Rovi stockholders in connection with its 2015 Annual
Meeting of Stockholders, which will be held on May 13, 2015:
Dear Fellow Stockholders,
We strongly urge you to vote “FOR
ALL” Rovi directors on the BLUE proxy card to protect the value of
your investment in Rovi. We believe the choice is clear:
- Focus on today and tomorrow – Rovi,
based upon its current Board’s insight and actions, is on the
precipice of delivering great value for our stockholders; or
- Focus on the past – reacting to
acknowledged mistakes, years later, by punitively replacing certain
Board members with less qualified candidates.
ENGAGED CAPITAL’S NOMINEES HAVE CLEAR
RECORDS OF VALUE DESTRUCTION
Despite Engaged Capital’s attempts to “set the record straight,”
we believe the facts speak for themselves. Engaged Capital’s
nominees have overseen serious value destruction in their roles at
other public companies.1 Further, the dissident slate’s claimed
“deep experience” is highly questionable and irrelevant to Rovi’s
business.
David Lockwood:
- Track record of stockholder value
destruction – Lockwood presided over negative alpha at Unwired
Planet (negative 64%), Liberate Technologies (negative
44%), InterTrust Technologies (negative 2%), BigBand
Networks (negative 38%) and EnergySolutions2 (negative
57%).
- Don’t forget the details –
Engaged Capital fails to mention that part of the strategy Lockwood
oversaw as Chairman and CEO of Liberate Technologies included
filing – and being denied by a federal court – for Chapter 11
bankruptcy protection. A media report even cited that the judge
“stopped short of deeming the bankruptcy filing one of bad
faith.”3
- Adverse Vote Recommendations –
Both Glass Lewis and ISS recommended that stockholders withhold
their votes from Lockwood.
- Unqualified in our view –
Lockwood’s purported intellectual property (IP) experience is
very different from Rovi’s complex IP
and product licensing businesses. Notably our industry intelligence
is contradictory to Engaged Capital’s claims that Lockwood has
“strong relationships with key executives at large Service
Providers.”
Glenn Welling:
- No IP experience; little to no
technology experience – Nothing indicates that Welling can set
an effective strategy in the technology sector. What’s more, we
believe Welling’s views on our cost structure demonstrate that he
doesn’t understand our markets, our customer dynamics, or our
current and effective strategy.
- No operational experience – When
Welling repeatedly points to his hedge fund’s investment success,
he ignores the fact that the criticism he is responding to is not
his ability to invest wisely, but his checkered record when
actually a steward for stockholders. Look instead to Engaged
Capital’s track record when they have taken a position on a
company’s board. We believe there is no evidence demonstrating that
Welling has, or is able to, contribute to a company’s operational
performance or actively manage a business, as opposed to an
investment portfolio.
- Another track record of stockholder
value destruction – Welling’s track record of value destruction
for stockholders at public companies speaks for itself. Engaged
Capital argues that “the short term results” of TriMas (negative
alpha of (4%)) and Jamba Inc. (merely 3%) since Engaged Capital
gained influence over the respective boards should be ignored given
the “limited timeframe” for evaluation. Interestingly, Engaged
Capital very pointedly neglects to refer to, and we strongly
encourage stockholders to examine, Engaged Capital’s results at
Abercrombie & Fitch, which has been operating with four Engaged Capital-approved directors for
over a year. During that
timeframe, alpha has been negative
(56%).
Raghavendra Rau:
- More stockholder value destruction
– Alpha at Aviat Networks was negative
(152%) during Rau’s Board tenure, and it was
negative (110%) during his
tenure at SeaChange International.
ENGAGED CAPITAL HAS NO PLAN TO DELIVER
ENHANCED VALUE
Engaged Capital still has no
plan.
Even at this late stage in the proxy campaign, Engaged Capital
has not yet presented a plan for Rovi. On the other hand, Rovi’s
Board proactively and comprehensively reviewed the Company’s
strategy and has repositioned Rovi for sustainable and profitable
growth. We are now in execution mode – spending more time and
resources on another round of lengthy and costly strategic reviews
could set us back. Now is NOT
the time for a learning curve or for vague “comprehensive reviews”
and “best practices.”
Now is not the time for potentially
destructive changes to a strategy poised for
success.
Any near-term attempt to shift Rovi’s strategy may well
jeopardize the future value of your Rovi investment. Our
next-generation product strategy plays a meaningful role in our
negotiations with the Big-4 service providers, and to us, calling
into question the future of the very products that are currently
being discussed is not a wise decision. We believe Engaged Capital
fails to comprehend our strategy and the factors that are important
in shaping and executing it. This is NOT the time for uncertainty and taking
blind and uneducated risks.
ROVI HAS THE RIGHT PLAN IN PLACE TO DELIVER
STOCKHOLDER VALUE
Rovi’s Board has openly acknowledged
past mistakes and has implemented a clear plan to drive value for
Rovi stockholders.
Rovi’s Board has taken responsibility for past mistakes and
moved the Company forward with a clear strategic plan. Engaged
Capital assigns blame for the past mistakes, yet glaringly fails to
acknowledge the decisive actions taken by the Board these last
three years in repositioning Rovi to execute on the opportunities
ahead.
Rovi’s plan is working.
Rovi is experiencing momentum and traction in our licensing
business and with our next-generation products, as demonstrated by
recent agreements with Charter, Dish, Verizon and others. These
wins highlight not only our improving growth trajectory, but also
the synergistic nature of our businesses and the leverage in our
cost structure. We are well-positioned to renew our major IP
licenses and on track to achieve double-digit revenue growth in
2016 and 2017.
Analysts agree.
- “We believe investors should vote
against Engaged Capital's board nominees.” Pacific Crest
Securities (Investors Should Vote Against Activist Board Nominees)
March 12, 2015
- “We think that activist charges are
largely a side-show as many of the claims relate to Rovi’s prior
management team, and that current management has been good stewards
in overseeing a long and painful turnaround in Rovi’s product
strategy which we believe is beginning to bear fruit.” Brean
Capital, LLC (1Q15 Review) May 1, 2015
- “Proxy fight with activist investor
seems like much ado about nothing.” Stephens (Quarter Looked
OK, but Full-Year Guide Not a Slam Dunk and Big-4 Renewals Loom)
May 1, 2015
- “We see activist charges as dated,
relating primarily to the missteps of Rovi’s prior management team,
which its board saw fit to replace. We believe the current
management team has spent the past three years correcting the
mistakes of their predecessors, strengthened Rovi’s IP position for
pending renewals, and executed on a product development strategy
that capitalizes on Rovi’s market position and technology
base.” Brean Capital LLC (Defending ROVI Against Activist
Charges) April 20, 2015
- “Q1 provided further indication that
Rovi's core business is performing predictably and the company has
positioned itself to consistently achieve guidance.” Piper
Jaffray (Strong Q1 Results) May 1, 2015
Rovi is poised for our next phase of growth – DO NOT put this in danger.
ROVI’S BOARD CONTINUES TO TAKE DECISIVE
ACTION BASED ON STOCKHOLDER FEEDBACK
We are listening to our
stockholders.
Over the past three years, Rovi’s Board has re-architected the
Company’s strategy, rationalized underperforming products,
dramatically reduced costs, repurchased a significant amount of the
Company’s stock, meaningfully changed executive pay, reduced its
own compensation and initiated a process to add targeted expertise
to the Board.
We are actively augmenting the Board to
add the RIGHT expertise in the RIGHT way.
Rovi is actively augmenting its Board and management team with
key strategic expertise to drive sustained and profitable growth.
We are making the RIGHT changes with qualified new Board members
like Steven Lucas, and are actively talking to and evaluating
highly qualified candidates that have been introduced to us by our
stockholders. As part of that process, we have repeatedly made
good-faith efforts to reach a reasonable settlement with Engaged
Capital to augment our Board with additional relevant industry
expertise, including offering to add one of Engaged Capital’s
nominees other than David Lockwood, whom we never believed to be
qualified. However, Engaged Capital continues to refuse settlement
and to insist on adding Mr. Lockwood. As a stockholder, if you
want to see additional expertise on the Board, make sure it is the
RIGHT expertise.
ALL of these actions reflect
conversations with Rovi’s stockholders. It is an iterative process
that occurs as part of our regular interaction with our
stockholders, including but not limited to recent conversations. Of
course some stockholder feedback and actions are recent, including
our action around Board compensation. It is convenient for Engaged
Capital to call that “reactive,” but our view is that, if the
feedback we get suggests the right course of action, our Board
takes it.
Do not put your investment at risk. Do not compromise
the significant progress Rovi’s Board has made.
Please vote “FOR ALL” nominees on the BLUE proxy card to protect your
investment.
Thank you.
FORWARD LOOKING STATEMENTS
This communication contains “forward-looking” statements,
including, without limitation, all statements related to Rovi’s
ability to achieve its goal of enhancing stockholder value through
the execution of its strategic plan, including all statements
related to upcoming significant intellectual property license
renewals, expected revenue growth, margin expansion and cash flow,
new product and IP business opportunities, and the timing thereof,
customer growth, expected return on the investments in core areas
of the business; the statements related to Engaged Capital’s
proposed reduction of product investment and its negative effect on
the stockholder value; and other statements that are not historical
facts. Any statements contained in this press release that are not
statements of historical fact may be deemed to be forward-looking
statements. Words such as “anticipate,” “believe,” “could,”
“expect,” “may,” “plan,” “will,” “would” and similar expressions
are intended to identify forward-looking statements. These
forward-looking statements are based upon Rovi’s current
expectations. Forward-looking statements involve risks and
uncertainties. Rovi’s actual results and the timing of events could
differ materially from those anticipated in such forward-looking
statements as a result of these risks and uncertainties, which
include, without limitation: risks related to Rovi's ability to
successfully execute on its strategic plan and customer demand for
and industry acceptance of Rovi's technologies and integrated
solutions; Rovi’s ability to successfully renew its major
intellectual property license agreements; and risks related to
future opportunities and plans, including the uncertainty of future
operating results. These and other risk factors are discussed under
the heading “Risk Factors” in Rovi’s Annual Report on Form 10-K for
the year ended December 31, 2014, filed with the Securities and
Exchange Commission on February 19, 2015. Rovi expressly disclaims
any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to
reflect any change in the Company’s expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statements are based.
If you have any questions, require
assistance with voting your BLUE proxy cardor need
additional copies of the proxy materials, please contact:
MacKenzie Partners, Inc.
105 Madison AvenueNew York, NY 10016
proxy@mackenziepartners.com
(212) 929-5500 (Call Collect)
Or
TOLL-FREE (800) 322-2885
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Rovi Corporation, its directors and certain of its executive
officers may be deemed to be participants in the solicitation of
proxies from stockholders in connection with Rovi’s 2015 Annual
Meeting of Stockholders. Rovi has filed with the SEC and has
provided to its stockholders a definitive proxy statement and a
BLUE proxy card in connection
with such solicitation. ROVI STOCKHOLDERS ARE STRONGLY ENCOURAGED
TO READ SUCH PROXY STATEMENT (INCLUDING ANY AMENDMENTS AND
SUPPLEMENTS) AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Information regarding the names of Rovi’s directors and
executive officers and their respective interests in Rovi by
security holdings or otherwise is set forth in Rovi’s definitive
proxy statement for the 2015 Annual Meeting of Stockholders, filed
with the SEC on April 13, 2015, and in Rovi’s annual report on Form
10-K for the year ended December 31, 2014, filed with the SEC on
February 19, 2015, which documents are available at the investor
relations portion of Rovi’s website at
http://ir.rovicorp.com/CorporateProfile.aspx?iid=4206196. To the
extent holdings of such participants in Rovi’s securities have
changed since the amounts described in the 2015 proxy statement, or
if a particular participant’s holdings are not set forth in the
2015 proxy statement, such holdings (or changes thereto) have been
reflected on Initial Statements of Beneficial Ownership on Form 3
or Statements of Change in Ownership on Form 4 filed with the SEC.
Information regarding the special interests of such participants,
if any, in the matters to be voted on at Rovi’s 2015 Annual Meeting
of Stockholders is included in the definitive proxy statement
referred to above. You can obtain free copies of these referenced
documents as described below.
These documents, including the definitive proxy statement (and
amendments or supplements thereto) and the accompanying
BLUE proxy card, and any other
relevant documents and other material filed by Rovi with the SEC,
are or will be available for no charge at the SEC's website at
www.sec.gov and at the investor relations portion of Rovi’s website
at http://ir.rovicorp.com/CorporateProfile.aspx?iid=4206196. Copies
may also be obtained free of charge by contacting Rovi Investor
Relations by mail at 2830 De La Cruz Boulevard, Santa Clara,
California 95050 or by telephone at (408) 562-8400.
About Rovi Corporation
Rovi is leading the way to a more personalized entertainment
experience. The Company’s pioneering guides, data, and
recommendations continue to drive program search and navigation on
millions of devices on a global basis. With a new generation of
cloud-based discovery capabilities and emerging solutions for
interactive advertising and audience analytics, Rovi is enabling
premier brands worldwide to increase their reach, drive consumer
satisfaction and create a better entertainment experience across
multiple screens. The Company holds over 5,000 issued or pending
patents worldwide and is headquartered in Santa Clara, California.
Discover more about Rovi at Rovicorp.com.
1 All references in this section use Alpha calculated as return
on stock (including reinvested dividends and adjusted for
spin-offs, splits and other corporate events) against the S&P
500 Total Return Index during Board tenure. Start dates based upon
disclosed effective dates. Source: FactSet as of May 1, 2015.2
Remains on the Board of EnergySolutions following a going-private
transaction.3 “Liberate Kicked out of Court.” The Daily Deal., 9
Sept. 2004.
InvestorsRovi CorporationPeter Halt, 818-295-6800Peter
Ausnit, 818-565-5200orMacKenzie Partners, Inc.Dan Burch,
212-929-5500orMediaSard Verbinnen & CoJohn Christiansen
/ Megan Bouchier, 415-618-8750
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