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ROVI IS EXECUTING ON A PLAN TO CREATE VALUE FOR STOCKHOLDERS
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ENGAGED CAPITAL DOES NOT EVEN HAVE A PLAN
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ROVI’S BOARD IS COMMITTED TO AUGMENTING WITH THE RIGHT EXPERTISE
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ENGAGED CAPITAL’S NOMINEES ARE NOT RIGHT FOR ROVI OR ITS
STOCKHOLDERS
SANTA CLARA, Calif.--(BUSINESS WIRE)--
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,
THIS IS A CRITICAL YEAR FOR EXECUTION: DON’T LET COLORFUL
COMMENTARY
ABOUT THE PAST PUT AT RISK THE VALUE CREATION
CURRENTLY UNDERWAY
ROVI URGES STOCKHOLDERS TO REJECT ALL ENGAGED
CAPITAL NOMINEES
VOTE “FOR ALL” ROVI DIRECTORS ON
THE BLUE PROXY CARD TODAY
Rovi’s Annual Meeting is quickly approaching, and you face an important
decision. Engaged Capital claims that Rovi needs change. The critical
question for our stockholders is whether nominees selected by a hedge
fund manager with no substantial experience in our fast-moving industry
can change Rovi for the better. Rovi’s Board of Directors has
architected a strategic plan to deliver significant value to our
stockholders, and that plan is beginning to bear fruit. DO
NOT RISK DISRUPTING THE VALUABLE OPPORTUNITIES AHEAD BY VOTING FOR
ENGAGED CAPITAL’S NOMINEES SIMPLY FOR THE SAKE OF CHANGE.
Rovi’s Board is continuing to enact change for the benefit of all
stockholders – and you deserve the RIGHT
changes that will create value on your investment. We are still
in the process of augmenting our Board, adding new
perspectives and valuable experience. We want to add the RIGHT
directors with the RIGHT experience, selected with stockholders’ best
interests in mind through a genuine process. We firmly believe that
Engaged Capital’s nominees do not possess
the qualifications or offer the value our stockholders deserve.
We strongly believe that Engaged Capital is the WRONG
change for Rovi today. All three Engaged Capital nominees have clear
track records of value destruction at other public companies, and not
one of them has presented a semblance of a future plan for Rovi or ideas
to create value for you. In contrast, our Board has set in motion a long
list of positive changes to put Rovi on a path for sustainable value
creation.
ENGAGED CAPITAL’S NOMINEES ARE WRONG FOR ROVI
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Glenn Welling is a hedge fund manager with no known intellectual
property (IP) experience or demonstrated operational ability, much
less in the technology field.
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David Lockwood’s qualifications are inferior and unneeded, as ISS and
Glass Lewis have agreed.
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Raghavendra Rau and Engaged Capital’s other nominees have clear
records of value destruction at other public companies, as you can see here.1
Over the past 2 years, Mr. Welling has publicly offered his “ideas” –
generic capital allocation strategies, for the most part – to a number
of companies, while deliberately raising his hedge fund’s profile as a
“shareholder activist.” The results are very concerning:
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At Abercrombie & Fitch – which has been operating with four Engaged
Capital-approved directors for over a year – alpha has been negative
(56%).
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At TriMas (TRS) and Jamba Inc. (JMBA) – the only other two companies
where Engaged Capital has board representation or influence – alpha
has been negative (4%) for TRS and
a meager 3% for JMBA, and Mr. Welling has been on the Board for less
than four months at JMBA.
Do not be fooled by materials Engaged Capital has filed during this
campaign. The hedge fund appears to claim credit for the returns of
companies in its portfolio despite a lack of Board involvement in
achieving those returns at any one of them. Glenn
Welling’s record on corporate boards is clear and it is troubling.
One of his nominees, David Lockwood, is in our opinion, unqualified. Both
ISS and Glass Lewis recommended against
him, despite their tendency to recommend in favor of dissident
candidates for no reason other than change for change’s sake.
Independent third parties have warned Rovi and its stockholders of
Lockwood’s value-destroying missteps while running IP negotiations for
Unwired Planet. In fact, he 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%). Despite
the value destruction at EnergySolutions, Lockwood received substantial
payments during his tenure, including $16.8 million in cash “to settle
existing obligations owed to” him. Also, while serving on the Liberate
Board, Lockwood received severance payments based on a partial asset
sale, a continued employment arrangement and a $325,000 cash bonus. We
believe there is legitimate reason to conclude, based on his prior board
and management experience, that David Lockwood could put Rovi’s IP
business at unnecessary and substantial risk.
Raghavendra Rau also has a poor track record when it comes to value
creation. Alpha at Aviat Networks was negative
152% during Rau’s Board tenure, and it was negative
110% during his Board tenure at SeaChange International. In
fact, after being brought to SeaChange as CEO and a member of the Board
of Directors by activist investor Starboard Value, he was replaced less
than three years later.
ENGAGED CAPITAL HAS NO PLAN FOR ROVI
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Rovi’s Board listens to Rovi’s stockholders and is making the changes
that make sense for Rovi, with a transparent plan to create
stockholder value.
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Rovi stockholders deserve to know what Engaged Capital nominees will
do differently if elected.
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The vague ideas Engaged Capital has advanced suggest Engaged Capital
does not understand the dynamics that drive Rovi’s revenues.
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Do not trust your investment to Board members that will still be
learning Rovi’s business during critical near-term events such as the
Big-4 renewals and next-generation product launches – the risk of
disruption is too high.
We believe it is crucial that Rovi stockholders understand what Engaged
Capital’s nominees intend to do if elected to the Board. It is highly
troubling to Rovi that even after an extensive proxy campaign and
several letters and presentations to you, Engaged Capital and its
nominees have outlined NO PLAN for Rovi.
There are no new ideas, not even a broad high-level vision to create the
value that Rovi stockholders deserve.
The vague steps Engaged Capital has hinted at are generic capital
allocation and cost cutting strategies that Engaged Capital has advanced
at a broad array of other companies – apparel companies, beverage
companies and the like – which have very different business models than
Rovi. Importantly, Rovi’s Board and management have been open to these
ideas, and discussed them with Engaged Capital, thoughtfully considered
them along with suggestions from other stockholders, and taken action
with respect to changes that the Board believes are in Rovi’s best
interest.
We believe Engaged Capital poses significant risk to the future value
of your investment. Without any plan beyond cost-cutting, Engaged
Capital appears poised to push for unnecessary and dangerous changes to
Rovi’s product strategy, which could destroy our next-generation product
business, and in turn threaten our IP business by disrupting synergies
between our IP and product businesses that are so important to
stockholder value.
Importantly, we think stockholders should ask: Why now? Why not wait
another year and judge the Company on the merits of the Big-4 renewals,
or the success of our new product launches? Rovi has already
conducted a comprehensive strategic review of its business and spent the
last three years rebuilding the Company into what it is today. Rovi
is experiencing momentum and traction with our next-generation products,
well-positioned to enter into a very critical year of renewing major
licenses, and on track to achieve double-digit revenue growth in 2016
and 2017. The start of yet another review
period at this juncture would essentially set Rovi back in time, risk
disrupting the significant progress we have made, and cost us
present-day opportunities. We question Engaged Capital’s
intentions and motivations in starting this process to gain
representation on the Board – and think our stockholders should too. Is
Engaged Capital acting in stockholders’ best interest or are they more
interested in building a name for themselves as a “shareholder activist?”
Rovi’s Board has been listening to the Company’s stockholders.
For example, the Board recently reduced its own compensation reflecting
recent conversations with a number of Rovi stockholders, and Rovi
received affirmative support from both proxy rating agencies this year
for its executive compensation program.
We believe Engaged Capital has given Rovi stockholders no good reason
to trust that its candidates would provide more thought, generate better
ideas or deliver more value than Rovi’s current directors, who have
carefully repositioned the Company over the past three years. It is
imperative that Rovi stockholders protect themselves against a hedge
fund manager who could dismantle the very strategy that Rovi’s Board and
management thoughtfully put in place – a
strategy that is working.
ADDITIONAL PERSPECTIVES ON ISS AND GLASS LEWIS’ RECOMMENDATIONS
Rovi strongly disagrees with ISS’ and Glass Lewis’ recommendations that
stockholders vote for Engaged Capital nominees Raghavendra Rau and Glenn
Welling. Respectfully, we believe these recommendations demonstrate a
lack of understanding of Rovi’s business and growth trajectory.
ISS has stated that when dissidents seek a minority position on a Board,
they do “not require a detailed plan of action, nor that the dissidents
prove their plan preferable to the incumbent plan” from the dissidents.
Rovi strongly disagrees with this point of view and believes this “hall
pass” for minority-seeking dissidents represents a naïve view of
boardroom dynamics and the impact of each Director on a company’s
strategy – particularly for companies like Rovi that have undergone a
transformation and face critical execution milestones in the year ahead.
We recommend that all Rovi stockholders review the Company’s response to
the recommendations issued by ISS and Glass Lewis, which can be viewed here.
ALLOW ROVI TO CONTINUE EXECUTING THE PLAN THAT IS WORKING FOR YOU
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Rovi operates in a fast-moving technology environment.
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Rovi stockholders deserve qualified Board members with the RIGHT areas
of expertise to guide Rovi’s strategy.
As our stockholders and equity analysts are well aware, Rovi operates in
a rapidly changing industry. Rovi needs a Board that can identify the
opportunities ahead and has an acute understanding of the market
environment and the customers Rovi serves. The Board has acknowledged
and taken responsibility for its past decisions that have not proven
successful – and most importantly – learned from them. The actions taken
over the past three years to transform the Company were effected by
Rovi’s current Board of Directors, and reflect the Board’s understanding
of our dynamic market. As a stockholder, if you want to see additional
expertise on the Board, make sure it is the RIGHT
expertise. A hedge fund manager and failed technology executive are,
in our opinion, NOT the right choices.
The bottom line is: Rovi is prepared to make the RIGHT
changes with qualified nominees like recent addition Steven Lucas. We
continue to actively augment our Board and management team with the
relevant expertise to continue executing our plan to achieve
double-digit revenue growth with expanding margins in 2016 and 2017. We
trust that Rovi stockholders will see Engaged Capital’s distracting
tactics, and allow our Board to rightfully focus on the path ahead.
We look forward to your support at the upcoming Annual Meeting by voting “FOR
ALL” nominees on the BLUE proxy card
and protecting 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 card
or need additional copies of the proxy
materials, please contact:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
[email protected]
(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 take-private.
Investors
Rovi Corporation
Peter Halt, 818-295-6800
Peter
Ausnit, 818-565-5200
or
MacKenzie Partners, Inc.
Dan
Burch, 212-929-5500
or
Media
Sard Verbinnen & Co
John
Christiansen / Megan Bouchier, 415-618-8750
Source: Rovi Corporation