California Micro Devices shareholder believes company needs 'new blood' to turn itself around

By Lisa Kerner

Charlotte, N.C., Feb. 3 - Dialectic Capital Management, LLC said California Micro Devices Corp.'s management and board of directors "were given ample time to turn the company around and failed."

"We believe that new blood is desperately needed in order to break the status quo of underperformance," Dialectic Capital said in a Feb. 3 letter to the California Micro Devices board.

The 8.6% shareholder is concerned with California Micro Devices' "well-publicized search for acquisition targets" and lacks confidence in the company's ability to pay a reasonable price should it find the right target.

Dialectic Capital cited "the debacle of the Arques Technology acquisition" under chief executive officer Robert V. Dickinson's leadership, according to the letter included in a schedule 13D/A filed with the Securities and Exchange Commission.

"The unrealistic expectations set at the time of this acquisition, as well as the rapid change of course by management, makes us skeptical that the currently contemplated acquisitions will create real economic value," Dialectic Capital said.

Dialectic Capital believes the company's board has taken steps to "entrench itself in order to implement a misguided strategy" and took issue with California Micro Devices' failure to buy back stock when the enterprise value of the company approached zero as an easy means to create shareholder value.

In the letter, Dialectic Capital said that should the company seek to "rush a deal" prior to the 2009 meeting of shareholders, the investor would reserve the right "to pursue all rights and remedies" available to shareholders against the company.

California Micro Devices, in a prior news release, disagreed with Dialectic Capital's suggestion that the company return $33 million, or $1.42 per share, in a dividend to all shareholders.

Dialectic Capital had also suggested the company work with an investment bank to sell itself, it was previously reported.

California Micro Devices is a Milpitas, Calif.-based maker of application-specific protection devices and display electronics devices for the mobile handset, digital consumer electronics and personal computer markets.

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