13D Filing: Eastbay Asset Management Buys Shares of Shutterfly Inc (SFLY), Expresses Concern Over Disinterest in a Sale

We find it hard to imagine a more opportune time to explore a strategic review.  An attractive unsolicited bid is on the table.  Despite many distractions, the busiest and most important quarter of the year is behind the Company with encouraging results.  The Company has an interim CEO in place and a new CFO.  The next logical step is to put the permanent CEO search on hold and conduct a formal review process with all prospective financial and strategic buyers.

Despite solid market share gains and consistent double-digit growth, Shutterfly has been in a five-year stretch of “no returns”.   Amazingly, the key drivers of shareholder value destruction have been mostly self-inflicted.  These factors include collapsing returns on capital, egregious “pay for no performance” CEO compensation, numerous false promises, ever changing strategic priorities, and a lack of trust that the Board is looking out for shareholder’s best interests.  While the CEO of the past 11 years is no longer at the helm of the company (as of last week), the Board of Directors that approved these ill-fated capital allocation decisions and unjustified compensation plans remains relatively intact.

We strongly encourage the Board to commence a proper strategic review and to be open to a sale of the Company that maximizes shareholder value.  The process was flawed in the Summer of 2014 and another botched opportunity is unacceptable.  Failure to represent the best interests of shareholders will lead to the second proxy contest in as many years and much needed change.

Sincerely,

Steve Landry

Managing Member

Adam Wolfberg

Managing Member

SK 22388 0001 7059967