Vote for the Strategy You Invested in: Vote “For All” on the BLUE
Proxy Card Today
- Rovi is Executing on a Clear Strategic Plan That is Working
- Engaged Capital Has No Plan – Just Colorful Commentary
- Engaged Capital Nominees Have a Consistent Track Record of
Stockholder Value Destruction
- Setting the Record Straight – Rovi’s History with Engaged Capital
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,
By now, you have heard from both Rovi and Engaged Capital, and
understand that Rovi stockholders face a critically important decision
about the future of your Company at the upcoming Annual Meeting. On the
one hand, Rovi’s Board of Directors has held itself accountable for the
past and reshaped the Company for success. On the other hand, you have
Engaged Capital, a 0.6% stockholder, that in our opinion has not
presented any semblance of a future plan and is focused only on
criticizing the past. Rovi has a qualified and responsible Board, which
we are augmenting to add even more valuable experience. By contrast, we
do not believe that Engaged Capital’s nominees rise to the level you,
our stockholders, deserve.
ROVI IS FOLLOWING A CLEAR STRATEGIC PLAN – AND THE PLAN IS WORKING
Rovi’s Board has taken responsibility for
Sonic acquisition
Engaged Capital claims that Rovi’s Board is “clearly refusing to own up”
and take responsibility for the past. Rovi’s Board readily acknowledges
that the acquisition of Sonic Solutions was not a good deal for Rovi.
Rovi’s Board then took responsibility and initiated a comprehensive
strategic review of the business. In connection with that review, the
Company has spent the last three years rebuilding Rovi from the ground
up under this Board’s direction.
Rovi’s Board has a clear plan to maximize
stockholder value – and the plan is working
Rovi has devoted significant resources to develop a new strategic plan
for the Company, including working with independent industry consultants
in the formulation and review of our plan and reaching out to our
customers and potential customers for direct feedback. The Company has
also added new industry-leading talent, both at the management and Board
level, to execute this plan.
We believe it is clear our plan is working:
- IP LicensingSuccess– Rovi’s Board has taken affirmative
steps to keep the patent portfolio fresh and relevant, including
overseeing the acquisition of a strategic set of patents in 2014, and
is now well-positioned to negotiate the upcoming Big-4 intellectual
property (IP) licensing renewals. The evidence
of Rovi’s strong positioning is clear: The Company recently
signed major patent licensing and product agreements with Charter
Communications, Mediacom and Sharp.
- Next-Generation Product Success – Rovi has overhauled our
product portfolio and engineering and development structure around
relevant, cloud-based products in discovery, metadata and analytics.
Again, there is clear evidence of our success:
Top service providers such as Dish Networks, Charter Communications
and Mediacom have recently entered into agreements for our
next-generation products. Additionally, Rovi’s Fan TV product won the
Cablefax Tech Award for Overall Tech Innovation.
The Board has carefully recreated a company that we believe is
positioned to capture the significant opportunities ahead and unlock
substantial stockholder value. Sell-side analysts who have covered the
Company – most for far longer than Engaged Capital has been a
stockholder – agree with Rovi’s approach.
Engaged Capital offers no alternative plan
for Rovi — just colorful commentary
Engaged Capital claims that it has “presented a very clear plan to
shareholders” and stated the “steps [it] believe[s] are necessary for
correction.” Do not be fooled. Engaged Capital has had access to
Rovi’s management team for nearly two years – more than enough time to
formulate at least a few ideas or a basic strategic vision for the
Company. Yet Engaged Capital has not articulated a vision or any
meaningful steps other than generic corporate finance strategies. THEY
HAVE NOT OFFERED ANY PLAN FOR ROVI.
Instead, Engaged Capital has reached into the past to attempt to
persuade stockholders to elect three seats – 43% of your Board –
nominated by an investor that holds barely one two-hundredth of our
outstanding common stock.
Engaged Capital doesn’t even seem to
understand Rovi’s business
Engaged Capital questions whether Rovi’s current strategy is working,
which demonstrates to us that Engaged Capital principal Glenn Welling
(having little to no technology experience and no operational experience
himself) does not understand the markets in which we operate and the
well-defined strategy that Rovi has put in place.
For example, Engaged Capital claims that Rovi’s current strategy should
result in “near-term revenue for Rovi.” While Rovi is certainly focused
on meeting both near- and long-term financial targets, the Company
has always made clear that the upcoming Big-4 IP licensing renewals are
among the most significant value drivers. These Big-4 renewals are
NOT like a typical IP licensing agreement. They are complicated
agreements and as most of our stockholders are aware, all four of these
contracts come up for renewal in the next 12 months. It appears that Engaged
Capital does not appreciate our current position and the careful
planning and execution over the last three years it took to get us to
this point.
WE BELIEVE ROVI HAS THE RIGHT BOARD TO DRIVE VALUE
The Rovi directors Engaged Capital wants to
replace all bring significant value to the Board
Current directors Andrew Ludwick, Jim O’Shaughnessy and Jim Meyer each
contribute key strategic value to Rovi. All three directors have been
instrumental in repositioning Rovi over the past three years, and we
believe their strategic advice and oversight are critical for Rovi’s
continued success as we work toward the upcoming Big-4 IP renewals and
continue to drive our next-generation product strategy forward.
Specifically:
- Andrew Ludwick, the current Chairman, has played a leading role
in architecting the Company’s new strategy. His background as a public
company CEO and Board member has proven invaluable to our management
team and Board function. Andy works directly with our CEO on
operational and strategic matters. Both as an executive and Board
member, Mr. Ludwick has an impressive record of driving stockholder
value.
- Jim O’Shaughnessy has decades of direct, hands-on experience
negotiating agreements as an IP licensing attorney and in IP dispute
resolution (including litigation). Jim works regularly with our patent
group on strategies with respect to the Big-4 renewals, and was a key
advisor to the team involved with the acquisition of a strategic
patent portfolio in 2014. His experience in the IP litigation and
licensing field are strategically valuable to us.
- Jim Meyer has operational experience as CEO of Sirius XM
Holdings Inc. (which we certainly consider, despite Engaged Capital’s
claims, to be an OTT content provider), which is owned in significant
part by Liberty Media (an established participant in our industry).
His background, contrary to Engaged Capital’s assertion, is not
Thomson Reuters, it is Thomson Multimedia Corporation (which we
believe is absolutely involved in the communication, media and
entertainment industries where we compete). Jim’s experience and
relationships with top-level executives in the service provider and
consumer electronics industries have been critical to Rovi.
WE BELIEVE THE ENGAGED CAPITAL SLATE HAS A CONSISTENT TRACK RECORD OF
STOCKHOLDER VALUE DESTRUCTION AND IS UNQUALIFIED
Engaged Capital claims: “We believe the past is the best indicator of
future performance.” Looking at Engaged Capital’s nominees on their
basis is a “fairytale” with a very unhappy ending for Rovi’s
stockholders.
CLICK HERE: Engaged
Capital Nominees' Track Record of Stockholder Destruction
In stark contrast, current Rovi directors, including Engaged Capital
targets Andy Ludwick and Jim Meyer, have strong records of value
creation as independent directors of public companies that
realized an average total return of 181% and alpha of 109% during their
directorships.
Rovi stockholders should NOT trust Engaged Capital’s slate of directors
who have a track record of destroying value
during their tenures on other public company Boards.
Additionally, Engaged Capital’s nominees do not bring compelling
experience. Glenn Welling is a hedge fund manager with no
known IP experience or operational experience at a technology company.
While Mr. Welling cites successful returns from his investments, there
is nothing that indicates he is able to contribute to operating a
company or set a strategy in the technology sector. David Lockwood’s
purported IP experience is very different from Rovi’s complex and
sophisticated IP and product licensing businesses. The results of his
“experience” are also deeply concerning – he oversaw Unwired Planet’s
acquisition of a patent portfolio from Ericsson that has been criticized
for having made it nearly impossible for Unwired Planet to monetize its
patent portfolio.
Even an IP industry trade publication has directly questioned the
IP-related expertise of the Engaged Capital nominees. Engaged Capital’s
nominees do not bring a level of qualification and performance that
warrants replacing our directors.
SETTING THE RECORD STRAIGHT – ROVI’S HISTORY WITH ENGAGED CAPITAL
Rovi is proactively augmenting the Board ON
OUR OWN INITIATIVE as part of our broader strategic transformation
Engaged Capital now claims that it “had been in discussions with the
Board regarding the Board’s composition since March 2014”, however, this
is directly contradicted by the chronology contained in Engaged
Capital’s own proxy statement, in which August 2014 is listed as the
first mention of Engaged Capital expressing its opinion that new
directors should be added to the Board.
In reality, Rovi’s Board reviewed and discussed Board composition
regularly, including in connection with the process of restructuring,
realignment and deep strategic review. Following the milestone of the
sale of DivX in March 2014, Mr. Carson met with leading professional
search firm Howard Fischer Associates in June 2014, and thereafter
members of management were directed to meet with Howard Fischer about
the impending search. Over the next several months, in conjunction with
management and the Board, Howard Fischer developed thorough criteria and
identified qualified candidates with high caliber experience and
demonstrated success in advanced data and analytics and the service
provider space.
Stockholders should remember the Board’s search process has already
yielded an exceptional candidate with the
appropriate strategic expertise in advanced data and analytics –
Steven Lucas, who was appointed to the Board in March 2015. Importantly,
the search process is active and ongoing, and we fullyintend
to continue to augment the Board this year with strategic expertise and
deep contacts in the service provider area.
Rovi attempted to resolve this matter but
Engaged Capital refused to come to a reasonable compromise
Engaged Capital’s assertion that they “sought a constructive solution
with [Rovi’s] Board” is not supported by their actions. The facts
are straightforward:
Rovi’s Steps to an Amicable Solution |
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| Engaged Capital’s Response |
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As part of our independent search firm’s process, Rovi offered
to interview Mr. Rao.
| | | | REJECTED: Engaged Capital had Mr. Rao cancel the pre-set
meeting unless Rovi agreed to settlement terms beforehand.
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Rovi made various attempts to come up with a solution with
Engaged Capital that would avoid a proxy contest.
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In our view, Engaged Capital made an unreasonable settlement offer
that would have included (i) election of two of Engaged Capital’s
nominees; and (ii) a committee structure that would have put
inordinate strategic decision-making power in the hands of the two
unqualified Engaged Capital nominees.
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Rovi counter-offered Engaged Capital’s unreasonable settlement
request with an offer to settle that would have included: (i)
adding (a) one of Engaged Capital’s nominees and (b) one highly
qualified candidate that our search firm had found (with Engaged
Capital also being offered the opportunity to interview such
candidate); (ii) addition of Engaged Capital’s nominee to our
existing strategy committee, which is comprised solely of
independent directors; and (iii) creation of a new finance
oversight committee, which would be chaired by Engaged Capital’s
nominee.
| | | | REJECTED: Engaged Capital rejected our offer and refused to
consider our proposed additional independent board member.
Engaged Capital later cited that such candidate being on another
company’s board with one of the existing Rovi board members made
him not independent. However, two candidates initially proposed as
independent candidates by Engaged Capital in December 2014 (David
Lockwood and Phil Vachon) have served on multiple boards and at
the same companies over the past decade – clearly
an inconsistent position.
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Rovi made yet another offer of settlement that would include:
(i) adding (a) one of Engaged Capital’s nominees and (b) one new
independent candidate, to be sourced and mutually agreed to by
both Rovi and Engaged Capital; (ii) addition to strategy
committee and creation of finance committee as previously
offered; and (iii) request for a standstill provision for six
months after the annual meeting to allow the new Board to settle
in without Engaged Capital making more demands.
| | | | REJECTED: Engaged Capital again rejected our offer. It seems
to us that Engaged Capital wants either (i) two of its nominees plus
back door Board control through committee or (ii) a proxy fight, and
nothing in between.
Another partial truth being told by Engaged Capital is the claim
that Rovi wanted “an unprecedented restriction of shareholder
rights” from Engaged Capital. What Engaged Capital is not telling
stockholders is that Rovi affirmatively offered Engaged Capital
the opportunity to propose changes to the standard standstill
provision in question, and Engaged Capital did not do so.
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With respect to Mr. Lockwood, Mr. Welling’s statement that Mr. Carson
“indicated he was impressed with Mr. Lockwood” is FALSE.
Rather, after a call with Mr. Lockwood in August 2014, in the spirit of
working with Engaged Capital in a constructive manner, Mr. Carson noted
that he would recommend that Mr. Lockwood be included in the Company’s
review/evaluation process, which he was. After review and analysis by
Howard Fischer of the qualifications, background and track record of the
candidates, Mr. Lockwood ranked next to last
among Rovi’s candidate pool.
Moreover, Engaged Capital has repeatedly claimed it is not seeking
majority control. The truth is that when Engaged Capital presented
nominees to the Company in December 2014 (after Rovi extended the
nomination deadline solely at Engaged Capital’s request), it sought a
majority of Board seats. Only recently, in March 2015, did Engaged
Capital change its nominee slate to three.
A CLEAR AND SIMPLE CHOICE
At the end of the day, Rovi stockholders face one important question:
Which slate of nominees can create the most value for them going
forward? OUR BOARD ARCHITECTED THE PLAN THAT REWORKED THE COMPANY,
TOOK US THROUGH TRANSITION, DROVE OUTPERFORMANCE AND HAS POSITIONED US
FOR GROWTH. Engaged Capital’s nominees don’t have the right
experience or a plan and have presided over significant value
destruction. THE CHOICE IS CLEAR – ROVI’S HIGHLY-QUALIFIED AND
EXPERIENCED BOARD IS BEST-POSITIONED TO DRIVE THE COMPANY FORWARD.
We do not believe it is in stockholders’ best interests to give a 0.6%
stockholder who has no stated vision for the Company, a questionable
understanding of our business and industry dynamics and nominees who
pale in comparison to the level of talent we seek to add 43%
representation on your Board.
We look forward to your support at the upcoming Annual Meeting. 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 BLUEproxy card or need additional copies of the proxy materials, please
contact:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
proxy@mackenziepartners.com
(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.
Contacts:
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, 415-618-8750
Megan Bouchier, 415-618-8750
Source: Rovi Corporation
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