Justin Kuepper from SECInvestor.com
reports: NetManage, Inc.
(NDAQ:NETM) shares moved up $0.08, or 1.53%, to $5.32 after Riley
Investment Management LLC expressed concerns with the company's
operating and financial condition and recommended that the it
immediately review a standing offer to acquire the company at $5.25 per
share. The 6% shareholder believes that the company should no longer
operate as a stand-alone public company, given their expensive public
compliance costs relative its size and its operating performance over
the last several years. Just how bad is it? Well, over the last 10
fiscal years NetManage’s revenues have
shrunk by approximately 66% while net losses amounted to approximately
$176 million. This caused the company’s stock to lose about 33% of its
value throughout the last five years while the NASDAQ added 28%. Even
more troubling was the fact that executive compensation rose 14% during
this period, while the CEO received 486,393 options, or enough to cover
around 5% of the shares during that period!
Riley Investment Management summarized the situation best in their letter attached to their Schedule 13D/A filing with the SEC:
We wish to conclude by reminding directors of their duty to maximize
and realize shareholder value. All of NetManage’s directors, aside
from one, have served on the board for more than 9 years and some have
held seats for over 15 years. This group of directors oversaw the
strategy that led to NetManage’s disappointing performance and endorsed
management’s decisions during the deterioration of the last decade.
Furthermore, none of the directors aside from the CEO are major
shareholders of NetManage. We therefore call on the board to change
course and acknowledge that NetManage’s operational plan is not working
for the benefit of its owners. We believe that the board of directors
should move swiftly towards realizing the value that still exists in
NetManage’s legacy customer base and recurring revenue sources, through
a sale of the Company to a strategic or financial buyer. With an
installed base of more than 10,000 customers, NetManage presents
potential buyers with a strong stream of maintenance revenues that
command an estimated gross margin in excess of 90%. Leveraging this
customer base can offer strategic buyers a solid platform on which to
grow additional products while utilizing a larger sales force and
spreading the cost of research and development over an expanded revenue
base. Alternatively, NetManage’s highly profitable recurring cash
flows can offer financial and private buyers excellent returns as they
eliminate the unnecessary costs of public filing, as well as what we
view as excessive management compensation and under-scaled general and
administration expenses currently incurred by NetManage.
there is a strong argument for the company to put itself up for sale. A
strategic buyer would be able to realize far more value than is
currently reflected in the current share price. This makes NETM a stock
worth keeping an eye on over the next few months!
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