DSP Group Issues Letter to Shareholders: A Minority Shareholder is Seeking to Hijack Your Company
Attention DSP Group Shareholders:
A Minority Shareholder Is Seeking to
Dear Fellow DSP Group Shareholders,
We write to report on your Company's and your Board's recent accomplishments and plans and to strongly urge you to reject the attempt of a narrowly-focused minority shareholder to seize control of the Board of your Company.
Starboard Has Refused to Settle for Anything Less Than Effective Control of your Company by Its Nominees
We have again this year done our utmost to avoid a proxy fight with Starboard, and the distraction and expense it represents for your Company and its Board and management. We offered Starboard increased board representation by nominating two additional directors and significant participation on Board committees, but to no avail. Based on our negotiations with Starboard and the preliminary proxy they filed, it seems they will be satisfied with nothing less than a majority of the Board consisting of hand-picked Starboard nominees that will control your Company – without paying any premium for that control and despite Starboard's equity ownership of only about one-tenth of the Company's shares.
We believe giving Board control to Starboard is not only disproportionate and inappropriate, but that doing so would not be in the best interests of
In the coming weeks you will be receiving proxy material from Starboard asking you to support their campaign to take control of
Your Board's Plan is Generating Improving Operating Performance and Increasing Stock Price
Over the past twelve months, your Board and management have been actively taking steps to enhance shareholder value. The market has recognized this, and
The actions set forth below, which were unanimously supported by your Board, have resulted in significantly improved operating results and we believe they have positioned
During the year ended
Operating expenses decreased by 20.7% to
$71.7 million, as compared to $90.5 millionfor 2011.
- Gross margin increased to 37.6% of total revenues for 2012, from 36.2% for 2011.
- The Company resumed non-GAAP profitability.*
$10 millionin cash flow was generated from operations.
$8 millionto shareholders through our continued stock buyback program.
DSP Group Is Well-Positioned for Growth and Profitability
We continue to focus on new growth initiatives that fully leverage the Company's core strengths in voice processing and short range wireless communications, while remaining focused on enhancing shareholder value in the near term with our commitment for profitability and cash flow generation.
Years ago, we recognized that the cordless telephony market was undergoing a challenging period of transition. With the rapid deployment of new communication access methods, including mobile, wireless broadband, cable and other connectivity, the traditional cordless telephony market using fixed-line telephony has been in a steady decline. Therefore, in order to offset the declining revenues generated from our cordless products and to seek new revenue sources, we continued to invest in new products and technologies that would allow us to build upon our core competencies in the expanding mobile market.
The fruits of this investment were apparent at the recent
We believe that the Company's improved performance demonstrates that the Board nominees up for election this year have the experience, expertise and determination to continue to lead the Company. These Board members recognized the long-term importance of continued investment in new technologies and products, as evidenced by investment in research and development efforts that we expect to become a significant contributor to revenue and profitability from 2014 and in the years to come.** The Company's nominees, together with the other Board members, have also demonstrated their capability to make the tough decisions when it comes to reducing costs and expenses in order to position the Company for long-term growth and profitability. They firmly believe in the Company and its future and have no agenda other than to represent the best interests of all shareholders.
We believe Starboard's nominees will seek to dismantle the Company, resulting in a limited short-term gain at the expense of building more durable shareholder value.
Your present Board has the necessary experience and expertise to best serve the Company and its shareholders, is committed to maximizing long-term value for all shareholders, and has demonstrated open-mindedness to doing whatever is necessary to that end.
We will be forwarding proxy materials to you in the near future so that you can help to defend
Chairman of the Board
Chief Executive Officer
The Company will file with the
Certain Information Regarding Participants
The Company, its directors and certain of its officers may be deemed to be participants in the solicitation of the Company's shareholders in connection with its 2013 annual meeting. Information regarding the names, affiliations and direct and indirect interests (by security holdings or otherwise) of these persons can be found in the Company's preliminary proxy statement for its 2013 annual meeting, which was filed with the
*Non-GAAP Financial Information
This letter contains references to non-GAAP financial measures.
Certain statements in this letter, including those denoted with **, qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations and
CONTACT: Investor Relations
Christopher BastaDirector of Investor Relations, DSP GroupWork: 1-408-240-6844 Cell: 1-631-796-5644 firstname.lastname@example.org Daniel H. Burch, CEO MacKenzie Partners, Inc.Work: 1-212-929-5748 Cell: 1-516-429-2722 email@example.com Media Relations Mike Sitrickand Jeff Lloyd Sitrick And CompanyWork: 1-310-788-2850 Jeff_Lloyd@sitrick.com Mike_Sitrick@sitrick.com