Silicon Imaging Investor Engaged Said Company Is 48% To 116% Undervalued

MarketWatch Pulse

Silicon Imaging's activist investor Engaged Capital, which said it increased its stake in the semiconductor company to 5.2%, said the company's stock was trading at a 48% to 116% discount based on a sum-of-the-parts analysis. In a letter to Silicon Imaging's board of directors, Engaged Capital managing member Glenn Welling urged the company to use its cash balance of nearly $150 million to "aggressively repurchase stock at current prices," as part of its recommendations to unlock the significant value of the company's assets. Welling also wrote in the letter that the company's "bloated cost structure," in which operating expenses are 50% of sales, or 20 percentage points higher than its peers, has hurt profitability. Therefore, Engaged is calling for a "material reduction" in costs. Silicon Imaging's stock, which wasn't active ahead of the open, has fallen 16% this year through Friday, compared with a 28% rise in the PHLX Semiconductor Index and a 12% gain in the S&P 500.

Copyright © 2014 MarketWatch, Inc.

Continue Reading Below