Nierenberg buys moreNierenberg adds another 577K shares. Info below:
Solely as a result of Brooks' recent acquisition of Helix Technology for Brooks' stock, our ownership percentage of Brooks has fallen below the 5% filing threshold. We do want to point out, however, that, since filing our prior 13D we have bought 577,646 more shares of Brooks.
We have made these additional purchases because we continue to believe that Brooks is extremely undervalued using almost any relevant definition of value: relative to the company's long term revenue and earnings growth potential, relative to its strong balance sheet, relative to its leading competitive position in outsourced tool
automation systems and service, relative to the increasing penetration of tool outsourcing, and relative to its complete and capable management team.
We attribute the persistence of Brooks' undervaluation to three short term factors, all of which we expect to decline in importance over the coming months. First, some Helix shareholders currently are selling the Brooks shares they received in exchange for their Helix shares. We believe this is happening either because they earned an acceptable return on their Helix investment or because they only invest in companies which pay dividends, which Brooks does not. Second, Brooks' software division recently surprised and disappointed the financial community with weak sales and an operating loss. Corporate management moved quickly to downsize the software division and narrow sharply its strategic focus, which had been overbroad. We expect immediate and
substantial improvement in the operating performance of Brooks Software and further expect that it soon will become, as before, an opportunistic source of positive cash for the parent.
More important, though, is that Brooks' acquisition of Helix makes crystal clear that the parent's strategic focus is on outsourced tool automation systems and services. Third, some market pundits have been predicting a poor retail Christmas, projecting from that, weak consumer electronics sales, flagging demand for chips, and diminished appetite for semiconductor capital equipment. To which we respond, based on our differing assessment of how well consumer electronics seem to be
selling: "Bah, Humbug!"
We do have a second reason for amending our 13D, beyond updating our ownership numbers. Immediately before Thanksgiving, we sent a letter to the Chair of the Nominating and Governance Committee of Brooks' Board of
Directors, setting forth our views on several matters of corporate governance. Unlike many other activist hedge funds, which seem to enjoy using their letters as rhetorical weapons, we have no plans to take our letter public. Diplomatic negotiations are best conducted diplomatically. Moreover, our relationship with Brooks is anything but adversarial. In fact, we are very pleased with their most recent addition to the board, which we view as extremely responsive to our concerns. Our only reason for disclosing the existence of our letter is that we believe that relevant federal regulations obligate us to do so.