WILSONVILLE, OR -- Another top Mentor Graphics shareholder turned up the heat on the EDA software company yesterday, issuing a public letter criticizing the company's management for "unacceptable" decision-making and performance.

In the letter, Casablanca Capital chief executive Douglas Taylor asserted Mentor’s share price has "severely underperformed" its top competitors and major stock indices since CEO Walden Rhines took over in 1993.

"On an unaffected basis the share price is down 17% during Mr. Rhines’ tenure, while Cadence’s share price is up 287%, Synopsys’ 117% and the S&P 500 has risen 181%. Despite this disappointing performance, the Board awarded Mr. Rhines on average over $2 million a year."

"Time is up for Mentor’s failing leadership," Taylor wrote. "It is time that Mr. Rhines and this Board stop working for themselves and start working for the company’s shareholders."

Casablanca holds about 5.5% of Mentor's stock, making it the second largest shareholder of the printed circuit board and IC software developer.

Rhines has also come under fire for not having a larger stake in the company. As of Sept. 30, Rhines held less than 500,000 shares, or less than 0.5% of the company stock. Taylor and others, most notably activist investor Carl Icahn, who at 14.7% is Mentor's largest shareholder, have insisted that Rhines' relatively small stake makes him less sensitive to shareholder concerns.

In his letter, Taylor said the board and Rhines have "consistently disregarded" shareholder concerns, citing its recent decisions to reject outside director nominees and a buyout offer from Icahn, and forgoing a $220 million loan proposal from Icahn in favor of issuing a similarly valued amount of convertible loan debentures.

"Mentor Graphics has become a poster child for unresponsive management and unfulfilled promises with a BOARD THAT IS NOT ACTING IN SHAREHOLDERS’ BEST INTERESTS." [Ed.: caps Taylor's.]

"The Board ... stated that the company’s current strategic plan is in the best interest of shareholders and asks that we trust in management’s ability to deliver marked improvement. However, Mentor’s record of operating performance under its leadership provides no basis whatsoever for that trust. Mentor’s operating margins and share price have lagged both Synopsys and Cadence over the past ten years as management has made no material improvement in aligning its cost structure to that of its peers."

Taylor called Mentor’s issuance of $253 million in convertible bonds "ill-timed and ill-conceived action" that would "punitively" dilute the shareholders' existing value in the company.

• Prev
• Next