NetManage shareholder wants company to sell

By Lisa Kerner

Charlotte, N.C., Dec. 4 - NetManage Inc. investor Riley Investment Management LLC expressed a lack of confidence in the company's leadership and urged NetManage to sell.

"We believe that shareholders will be best served, and value most appropriately realized, through an immediate auction of the company in which we believe NetManage could garner bids of between $5 to $6 per share, or a 25% to 60% premium to current trading prices," the 7.5% stakeholder said in a Dec. 4 letter to NetManage's board of directors.

The letter was included in a schedule 13D filing with the Securities and Exchange Commission.

Riley said the company's shares are undervalued and reflect a "management discount" based on NetManage's "disappointing history." The investor does not believe the company's current board and management team have the same sense of urgency as do the current equity holders.

Riley predicted that NetManage will "continue to struggle under the burden of large operating expenses and narrow product line."

"Quite frankly it is fascinating to us the position you have taken with your shareholders. It is our belief that none of your largest holders support your independent strategy. In fact, if it was not for your onerous bylaws, we would immediately call a special meeting for the purpose of removing all of your directors," the letter stated.

Riley also questioned chairman, president and chief executive officer Zvi Alon's salary of $475,000, calling it "a special dividend to only him using shareholder funds."

In closing, the investor said it would closely monitor the board's actions and asked the board to retain a banker and auction the company "as expeditiously as possible."

Riley had made a partial tender offer in December 2006 for up to 1,296,890 shares of NetManage at $5.25 per share. Three business days prior to the end of the offer, NetManage said it received a merger proposal to acquire the company at a price per share in excess of Riley's price of $5.25. Riley called the timing of the new offer announcement "fortuitous." Discussions of the merger proposal were later suspended.

NetManage is Cupertino, Calif., software company.

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