Emulex Veteran CFO To Step Down Amid Shareholder Unrest

Network connectivity provider Emulex (ELX) is searching for a new chief financial officer. Michael Rockenbach, a 22-year company veteran and CFO since 1997, will relinquish his duties on Dec. 31, bowing to pressure from activist investors who have blamed him for the vendor’s poor financial performance and strategy. 

While Rockenbach’s resignation doesn’t carry near the weight of the assumed impact ValueAct Capital may have exerted to prompt Microsoft (MSFT) chief Steve Ballmer’s retirement in the coming months, it does point out again the influence large institutional shareholders can have on a company’s executive suite.

Emulex gave no reason for Rockenbach’s departure but activist investors Elliott Management and Starboard Value, which according to a Bloomberg report have hired Goldman Sachs to find a buyer for the company, have contended the stock is undervalued and pressured management to detail a new strategy and name new board members. In the last year, the company’s stock has traded in a tight range, dipping to $5.84 in May, climbing to $8.32 in mid-July and falling slightly to around $8 of late. The two investors together hold slightly less than 18 percent of Emulex.

“Mike has provided Emulex with strong financial leadership and great industry knowledge for more than 20 years,” said Jeff Benck, Emulex president and chief executive. “During his tenure as CFO, he has established a highly skilled global finance team to meet the evolving needs of the company.” 

Emulex said it will consider both internal and external candidates to fill Rockenbach’s slot.

Last week, Starboard, which owns 7.9 percent of Emulex shares, in a letter told Benck it believes the company is “extremely undervalued and that clear opportunities exist within the control of management and the board of directors of the company to unlock significant shareholder value.” In the letter from Peter Feld, Starboard managing partner, the investor wrote that “specific changes must be made to address years of dismal operating and share price performance as well as sub-optimal corporate governance.”

In Q4 2013, Emulex posted a 3 percent sequential increase in sales to $120.4 million and a GAAP loss of 5 cents per share. Net sales for the fiscal year came in at $478.6 with a GAAP loss of 6 cents per share. For the first quarter of fiscal 2014, which closes Sept. 29, Emulex expects total net revenues in the range of $109-$113 million and non-GAAP earnings per diluted share of 9 cents to 11 cents.

Earlier this year, Emulex bucked up its Connect Partner Program with a partner loyalty offering, better training tools and streamlined deal registration.