NEW YORK, Oct. 17, 2011 /PRNewswire/ -- Cadian Capital
Management, LLC issued the following letter today to the
shareholders of Comverse Technology, Inc. (NASDAQ: CMVT) urging
shareholders to join with Cadian in voting "AGAINST" directors
Raz Alon, Joseph O'Donnell and
Theodore H. Schell at Comverse's
annual meeting of shareholders scheduled to be held on November 16, 2011:
PLEASE DO NOT RETURN ANY PROXY MATERIALS TO COMVERSE
TECHNOLOGY, INC. UNTIL YOU READ THIS LETTER.
YOUR VOTE IS MORE IMPORTANT THIS YEAR THAN EVER
BEFORE.
CADIAN CAPITAL MANAGEMENT, LLC PLANS TO VOTE "AGAINST" THREE
OF THE EIGHT DIRECTORS UP FOR RE-ELECTION THIS YEAR (MESSRS. ALON,
O'DONNELL AND SCHELL).
PLEASE JOIN US BY ALSO VOTING "AGAINST" ON YOUR
PROXY.
October 17, 2011
Dear Fellow Shareholders of Comverse Technology, Inc.:
The Annual Meeting of Shareholders of Comverse Technology, Inc.
(the "Company") is scheduled for November
16, 2011. You may have already received, or will soon
receive, proxy materials directly from the Company. Eight
incumbent directors are up for re-election at the Annual
Meeting.
Cadian Capital Management, LLC, together with the other members
of the Cadian Capital Group listed below, collectively beneficially
own approximately 4.18% of the Company's outstanding shares of
common stock. THE CADIAN CAPITAL GROUP PLANS TO VOTE
"AGAINST" DIRECTORS RAZ
ALON, JOSEPH O'DONNELL AND THEODORE H. SCHELL, IN PART FOR
THE REASONS OUTLINED BELOW, AND URGES SHAREHOLDERS TO JOIN WITH US
IN THIS EFFORT.
SEND A MESSAGE THAT SHAREHOLDERS WANT MANAGEMENT AND THE
BOARD TO BE HELD ACCOUNTABLE FOR THE COMPANY'S:
Poor Stock Price Performance
- On March 14, 2006, the Company
announced it was investigating a stock option backdating fraud.
Since January 1, 2007 - after the
initial decline surrounding the option accounting issues - the
Company's stock price has declined by approximately an additional
68%. While the S&P has declined by approximately 15% over
this same period, we believe the Company's massive underperformance
can be attributed to a number of factors, including poor operating
decisions, failed hiring decisions, a flawed accounting restatement
strategy, and misguided compensation policies. All of these
problems under the Board's supervision have resulted in the
destruction of over one billion
dollars of shareholder value, and a five-year restatement
process.
Poor Operating Performance
- Since 2007, Comverse Network Systems (CNS) business revenues
have declined by approximately 21%, materially underperforming its
peers. Additionally, CNS has averaged approximately 1% operating
margins over the past five years, while its peers have averaged in
the mid to high teens over the same period.
- The Company spent years and lost tens of millions of dollars
trying to fix the Netcentrex acquisition, where the decision to
wind down the asset should have been made years ago.
Poor Corporate Governance and Internal Controls
- The Company has not held an annual meeting of shareholders
since June 2005, denying shareholders
the opportunity to express their views on the Board.
- The Company did not file an Annual Report on Form 10-K or
Quarterly Report on Form 10-Q with the SEC for a more than
five-year period (April 20, 2005 to
October 4, 2010).
- The Company has failed to remedy the numerous material
weaknesses in its disclosure controls and procedures and internal
control over financial reporting.
Poor Management of Accounting Restatement
- The Company originally told investors it would complete its
restatement in the Fall of 2008. Instead, the Company took
five years and only completed its restatement earlier this
year.
- The Company has spent more than $550
million on legal and accounting fees since 2006.
- As a result of the Company's failure to file required periodic
reports with the SEC, the Company's common stock was delisted from
NASDAQ on June 1, 2007. The
Company needed more than four years to regain compliance with
NASDAQ's listing standards, and was within weeks of being
deregistered by the SEC.
Poor Management Decisions
- The Board oversaw the ill-fated hiring and subsequent departure
of CEO Andre Dehan (April 2007 – February
2011), CFO Joe Chinnici
(June 2008 – May 2009), CFO Stephen
Swad (May 2009 – October 2010), as well as two General Counsels.
The Company's CNS unit still does not have a permanent
operating CEO or CFO in place.
- Since 2007, a total of 13 senior executives of the Company and
its subsidiaries have either resigned or been terminated.
Poor Compensation Practices
- The Company paid former CEO Andre
Dehan more than $18,000,000 in
cash and stock from his appointment in 2007 through his resignation
less than four years later, during a time period in which the
Company's stock price plummeted approximately 68%. In our
view, this is pay for no performance.
- Shareholders have not been able to elect directors for six
years despite an alarming array of serious problems confronting the
Company. During this time, the Board has increased its own
annual cash and stock compensation from a median of approximately
$35,000 in FY2006 to between
$250,000 and $500,000 in each of
FY2007, 2008, 2009, 2010, and 2011. Shareholders have paid
Board members more than $14,000,000
in cash and stock over the past five years, while the Company's
stock has declined more than 68% during this same period. We
believe directors' compensation should be significantly reduced
going forward.
Your "AGAINST" vote matters because
directors of the Company are elected by a "majority of votes cast,"
meaning that the number of shares voted "for" a nominee must exceed
the number of votes cast "against" that nominee in order for that
person to be elected as a director. Accordingly, your
"AGAINST" vote has the ability to effect real
change on the Company's Board.
The Cadian Capital Group is a long-term, significant shareholder
of the Company whose interests are aligned with yours. Like
you, we have a vested interest in the Company's success. We
are voting "AGAINST" because we believe these
directors must be held accountable for the significant destruction
of shareholder value that has occurred on their watch.
IT IS TIME FOR A CHANGE. We want directors who are
accountable to shareholders, whose interests are closely aligned
with shareholders and who have substantive experience that is
relevant to the core business of the Company and its majority-owned
subsidiary, Verint Systems, Inc. We therefore urge the
Company to nominate to the Board directors with relevant operating
experience like Richard N.
Nottenburg, and/or substantial ownership interest in the
Company like A. Alexander Porter
(two directors not included in the Company's current slate for its
Annual Meeting) in order to best maximize shareholder value.
Your vote "AGAINST" directors ALON,
O'DONNELL AND SCHELL will send a strong message to the Company
that shareholders demand these immediate changes to the Board.
For these reasons, the Cadian Capital Group urges you to join us
in voting "AGAINST" directors ALON,
O'DONNELL AND SCHELL.
The Cadian Capital Group consists of the following persons:
Cadian Capital Management, LLC, Cadian Fund LP, Cadian Master Fund
LP, Cadian Offshore Fund, Ltd., Cadian GP, LLC and Eric Bannasch.
Sincerely,
/s/ Eric Bannasch
Eric Bannasch
Managing Member
Cadian Capital Management, LLC
Vote "AGAINST" Today for Comverse Technology,
Inc. Directors ROZ ALON,
JOSEPH O'DONNELL AND THEODORE H. SCHELL.
You should receive Comverse Technology, Inc.'s proxy materials
directly from the Company, along with a proxy card and postage-paid
return envelope. We expect that the Company will provide you
with instructions on how to vote by telephone via an 800 phone
number and via the Internet. The Cadian Capital Group is not
soliciting proxies, so please cast your vote "AGAINST"
directors Raz Alon, Joseph
O'Donnell and Theodore H. Schell
directly on the Company's proxy card by signing, dating and
returning the proxy card that you receive from the Company or by
submitting your proxy by phone or the Internet.
Only your latest dated proxy card counts so you can change your
vote even if you previously voted. The Annual Meeting is
scheduled for November 16, 2011.
If you need assistance in voting your shares by telephone,
Internet or mail, please call Morrow & Co., LLC at 800.662.5200
or 203.658.9400.
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy card as it will not be
accepted.
Cadian Capital is an equity long/short hedge fund manager with a
focus on the technology sector.
SOURCE Cadian Capital Management, LLC