(Close the doors)
ESS Investor Asks Board to Close Company
Monday June 4, 4:32 pm ET
ESS Technology Investor Asks Board to Sell Assets, Return Cash to Shareholders
NEW YORK (AP) -- An ESS Technology Inc. shareholder on Monday asked the chip maker's board to sell off its assets and return the proceeds to shareholders, citing its history of losses and lagging share price.
The investor, Riley Investment Management LLC, predicted the action would yield a value of about $2.70 per share.
ESS shares surged 6 cents, or 4.6 percent, to close at $1.38. The company's stock has traded between 78 cents and $2.81 during the past 52 weeks.
ESS did not immediately return a call for comment.
In a letter to the board on Tuesday, Managing Member Bryant Riley also asked for board representation to ensure timely action.
"We believe management faces an uphill battle in restoring profitability at ESS Technology," Riley wrote. He said the company faces a declining outlook for its core DVD chip products and intense competition from larger players. The investor also noted that ESS "has lost money for eleven consecutive quarters" and "is expected to lose money for the remainder of 2007."
Riley also criticized the company for its spending on executive compensation, bonuses and gifts, including a $4,760 wristwatch given to one employee. He was particularly critical of compensation awarded to Chairman Fred Chan and an option exchange program that repriced employees' options to $4.12 from the mid-teens -- moves that Riley considers "to be lapses in ethical judgment."
"Although we have seen swaps in which non-executive employees exchange a number of options that are out of the money for one option at market, this one-for-one exchange which included over 900,000 shares for the CEO, CFO and chairman is as onerous as we have ever seen," Riley wrote.
Riley also called the company's acquisitions of Divio Inc. and Pictos Technologies Inc. in 2003 "unmitigated disasters" and said future planned acquisitions would also be a mistake.
Riley Investment Management reported beneficial ownership of a 6.7 percent stake in the Fremont, Calif.-based company.
surf's up......crikey
