Urges Stockholders to Support its Director Nominees, Whose Interests are Truly Aligned with Stockholders
NEW YORK, Aug. 20 /PRNewswire/ -- Dialectic Capital Management, LLC ("Dialectic Capital") announced today that it has sent a letter to the stockholders of California Micro Devices Corporation ("CMD" or the "Company") (NasdaqGM: CAMD) urging them to elect three highly qualified and experienced director nominees, John Fichthorn, J. Michael Gullard and Kenneth Potashner, by signing, dating and returning the GOLD proxy card. The Dialectic Capital group is the second largest stockholder of the Company and beneficially owns 2,025,011 shares, representing approximately 8.8% of the Company's outstanding common stock.
The full text of the letter follows:
August 20, 2009
Dear Fellow Stockholders:
Dialectic Capital Management has been a stockholder of California Micro Devices Corporation ("CMD" or the "Company") since 2006 and is its second largest stockholder with 8.8% of the Company's outstanding common stock. CMD's largest stockholder has recently voiced concerns similar to those consistently raised by Dialectic regarding the Board's poor corporate governance standards. We believe that the Board has demonstrated, repeatedly, a desire to distance itself from the legitimate concerns of its stockholders. We further believe that CMD's June quarter results leave stockholders with little to look forward to, are the culmination of seven years of mismanagement and truly reflect that the existing Board has failed to develop any viable plan to grow CMD's business.
Dialectic Capital has engaged in several attempts to negotiate a settlement to add stockholder representation to the Board with the aim of maximizing stockholder value and avoiding an election contest. Our efforts have fallen on deaf ears. To be clear, our nominees will join the Board with a mandate to fully and objectively explore all strategic alternatives with one goal - the maximization of stockholder value. Do not be mislead by the existing Board--we are not seeking control of the Company. Given our significant ownership in the Company, our interests are clearly aligned with yours. In contrast, the Board and management only own a combined 88,000 shares of stock.
CMD'S DEPLORABLE JUNE QUARTER RESULTS REFLECT SEVEN YEARS OF INERTIA BY THE BOARD
CMD's June quarter results paint the picture of a dormant enterprise with declining revenues and a lack of strategic initiatives to drive future growth. While the semiconductor industry as a whole achieved a 17% percent sequential rebound in revenues, CMD barely managed to expand revenues 2% sequentially, posting its lowest sales figure in seven years.
We believe the Company's lagging position is a direct consequence of the Board and management's inability to execute a long-term strategic plan, as most recently exemplified by the sudden decision to abandon the development of serial display controllers. Consider that as recently as May 2008, management had characterized serial display controllers as a "major growth opportunity."
Similarly, in April 2006, management trumpeted the acquisition of Arques Technology as marking "an important milestone in the evolution of California Micro Devices." Only 14 months later, management began reversing its position. By December 2008, management wrote off all of the goodwill associated with this acquisition.
The Arques Technology and serial display controller debacles highlight a recurring theme: management has repeatedly embarked on risky projects in an indecisive manner, failing to deliver tangible results for stockholders. Meanwhile, the Board has clearly failed to hold management accountable.
Management's "ownership" interest is concentrated in over 2.9 million under-water stock option grants. We believe not having "skin in the game" has caused the Company to follow a "quick buck" strategy, funding losses with stockholder cash in the hopes of seeing one of their high risk projects strike gold in time for them to exercise their options. Unfortunately all their efforts have failed.
THE BOARD AND MANAGEMENT HAVE YET TO PROPOSE A COMPELLING PLAN TO GROW THE BUSINESS
In a research note reviewing CMD's June quarter results, Needham sell-side analyst Vernon Essi concluded that:
"[W]e are increasingly skeptical there is a long-term growth plan in place for CAMD as we believe it is experiencing revenue declines in its core ESD product line and HB LED is not a strong enough offset."
Analysts are projecting that CMD will continue to lose money at least through fiscal 2011 and that revenues will stagnate in the sub-$50 million range.
