Activist investing firms have been raising the pressure on companies that either have underperformed or that are sitting on a mountain of cash that is returning very little value to shareholders. We have taken a look at six such stocks and laid out some of the issues that both the activists and the companies face for the year ahead.
When activist investor Carl Icahn revealed a $2.05 billion stake in Apple Inc. (NASDAQ: AAPL) last month, he said that he had sent a letter to Apple CEO Tim Cook urging him to return more cash to shareholders. Icahn wants Apple to initiate a tender offer for $150 billion of its stock, and he has said that he is willing to lead a proxy fight to force the board to do so. One could argue that pressure from David Einhorn earlier this year moved Apple to get its current $60 billion buyback rolling and that Icahn’s demand for the larger buyback stands little chance of success. Apple shares have climbed back from a one-month low of around $513 a share to trade at around $555. The stock’s 52-week range is $385.10 to $594.59, and the consensus price target according to Thomson Reuters is around $579.
Starboard Value continues to push Compuware Corp. (NASDAQ: CPWR) to shed assets and to look at selling the company, which is currently valued at around $2.4 billion. So far Starboard has been able to force some boardroom changes and the spin-off of Compuware’s health care technology unit. Starboard also is pushing the company’s board for a share buyback of up to $450 million. Compuware’s shares now are trading around $11, in a 52-week range of $9.31 to $12.74, and the consensus price target is $12.50. The company rejected an $11 per share buyout from activist investor Elliott Management last year.
Emulex Corp. (NYSE: ELX) has come under increasing pressure from both Starboard and Elliott in the past few months. The activist firms wanted board changes, cost cuts and a share buyback program. They got all three: a $200 million share buyback was announced last month, the company’s chairman will not seek reelection and a new chief executive is reining in costs. Emulex rejected an $11 a share buyout offer in 2009 and has seen its stock price slide ever since. Shares are trading near $7.30. The 52-week range is $5.72 to $8.99. The consensus price target for the stock is $8.20.
Another company facing off with Carl Icahn is Nuance Communications Inc. (NASDAQ: NUAN), and it is no wonder. Since executing a standstill agreement in August that prevents Icahn from acquiring more than 20% of the company, the stock has performed miserably. Icahn has added two appointees to the company’s board, but a weak third quarter and an outlook for no organic growth probably makes Icahn want to kick his dog. Shares of Nuance’s stock have fallen from near $20 in mid-September to around $13.50, after hitting an annual low after reporting earnings last week. The stock’s 52-week range is $13.00 to $24.85, and the consensus price target is $17.50.
Elliot Management said early in November that it had acquired a stake of about 10.4% in Riverbed Technology Inc. (NASDAQ: RVBD) and it has pushed for “strategic changes” and a review of the company’s capital structure. Riverbed has about $200 million left in its stock repurchase program after buying back $50 million, and its low valuation makes it a reasonable takeover candidate for companies looking for a bigger plan in the wide-area-network sector. Riverbed has retained Goldman Sachs to study its options but has so far precluded a sale of the company from the list of options. Perhaps Riverbed should reconsider a sale; the shares jumped 8% when the rumor of sale hit the street. Shares are trading at around $17.30, in a 52-week range of $13.77 to $21.39. The consensus price target on the shares is around $17.15.
Starboard Value owns 7.9% of the shares of TriQuint Semiconductor Inc. (NASDAQ: TQNT) and has urged the company to restructure or sell its mobile power amplifier business with little success. Starboard said Monday morning that it will nominate its own slate of six candidates for the company’s board, saying big changes are needed to reverse TriQuint’s “prolonged underperformance.” The activist firm turned up the heat after the company issued weak guidance for the fourth quarter. TriQuint shares are trading at around $7.90, in a 52-week range of $4.31 to $8.98, and the consensus price target is around $8.30.