Integrated Silicon Solution, Inc. (ISSI): Starboard Discloses New Letter Sent to CEO; Outlines Why Stock Is Undervalued

After initiating a position a couple of days ago, Jeff Smith‘s Starboard Value disclosed a letter sent to the President and CEO of Integrated Silicon Solution, Inc. (NASDAQ:ISSI), Scott Howarth, in which the investor outlined several issues that might have a negative impact on the stock price. Moreover, the stockholder group that consists of Starboard and Oliver Press Partners inched up their position to 2.40 million shares, which represent 7.8% of the company, versus 7.2% held earlier, a newly amended filing with the Securities and Exchange Commission showed.

Jeff Smith

In the letter, Starboard and Oliver Press reiterated that they consider the stock undervalued and therefore Integrated Silicon Solution, Inc. (NASDAQ:ISSI) should take advantage of the some opportunities within the control of management and the Board, in order to provide more value for shareholders. However, to achieve this the board needs to be restructured and needs to include more independent directors with experience in the industry. In their previous letter addressed to the board of directors, Starboard and Oliver Press expressed their intention to nominate several candidates to be elected to the board of directors at the next annual meeting of Integrated Silicon Solution’s shareholders.

Moreover, the letter added that Integrated Silicon Solution, Inc. (NASDAQ:ISSI) established itself strongly in the specialty memory products, DRAM and SRAM, to the auto and industrial markets. However, even though the business has jumped to $230 million, from $44 million over the past five fiscal years, it still trades at a substantial discount to its peers, and, in fact, represents one of the cheapest companies in the semiconductor space. The investors consider that the discount came on the back of a distraction from several non-core acquisition initiatives and this issue can be solved if the company focuses more on its profitable core business. In this way, new directors will help the company to better evaluate its non-core businesses.

Starboard’s plan to appoint five new directors to the board of Integrated Silicon Solution, Inc. (NASDAQ:ISSI) has a high probability to succeed by receiving the support of the majority of other shareholders. Starboard has previously managed to replace the entire board of directors of Darden Restaurants, Inc. (NYSE:DRI), even though it had a proxy fight with the company before that. Moreover, after gaining the support of shareholders, the market also positively appreciated Starboard’s effort and the stock gained more than 17% since the board has been replaced.

Disclosure: none