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 The possible tie-up between the $50 billion storage company and the
privately owned computer maker, which surfaced on Wednesday, would
be the largest tech deal ever and would solidify Elliott's
reputation of sparking key and sizable transformations throughout
pockets of the industry.
While other famous activists such Nelson Peltz's Trian Partners and
Bill Ackman's Pershing Square have steered cleared of technology
investments because of their volatile nature, Elliott, run by
billionaire hedge fund manager Paul Singer, has made a name for
itself in the technology sector.
Elliott has agitated for changes at EMC since 2014, and on Thursday
the hedge fund announced yet another tech-focused position and plan:
it disclosed stakes in U.S. video-conferencing equipment maker
Polycom Inc and Canadian telecoms provider Mitel Networks Corp and
pushed for a combination of the two.
Elliott's aggressive tech investing also stands out for its ability
to lay the groundwork for wider consolidation in the section of the
industry it targets.
"They've been able to come into companies that have faced
challenging markets and been able to drive change," said Macquarie
analyst Rajesh Ghai.
The multi-strategy hedge fund founded by Singer in 1977 has pursued
more than 40 campaigns aimed at tech companies in the 11 years since
its star tech investor, Jesse Cohn, pioneered this arm of the firm.
Among the keys to Elliott's success with technology investments is
that Cohn, 34, is a former programmer who has built a team of
industry experts. Cohn's main approach to tech investing, like that
of the broader Elliott philosophy, is to find under-valued companies
in struggling sectors and push for changes.
"The problem with technology is most technology companies are too
dynamic," activist investor Pershing's Ackman said at a CNBC event
in July. "I mean, you wake up and there's a couple of guys in the
garage a block from Stanford University - a couple of women in a
garage - and they are starting a new business that's disruptive."
Trian's Peltz, at that same event, said: "We like businesses ...
that sort of have moats around them. And technology is one that
isn't."
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But Elliott has targeted parts of the tech industry where the moats
have already been penetrated, on the bet that the business segments
are ripe for consolidation.
Compuware Corp, Riverbed Technology Inc., BMC Software Inc, NetApp
Inc, Novell Inc and Blue Coat Systems Inc have all been Elliott
targets in the past few years. Tech-focused private equity firm
Thoma Bravo ended up buying Compuware, Riverbed and Blue Coat
Systems.
Elliott has pushed for an EMC breakup since 2014, entering into a
standstill early this year that lasted through September. In June,
Elliott said cloud-computing software maker Citrix Systems Inc
should sell some units, cut costs and buy back shares to make up for
six years of underperformance. Citrix named Cohn to the board the
following month.
One tactic Elliott has rolled out in the tech space is offering to
buy a company it's targeting, given that part of its multi-strategy
approach includes a private equity division that can manage
businesses. Few activists are willing to make a buyout offer because
operating a business is not part of the strategy's remit.
Elliott owns a 4.1 percent stake in CDK, an automobile software
provider. Last month, Reuters reported Elliott was seeking to team
up with a private equity firm to buy out the company.
(Reporting by Michael Flaherty; Editing by James Dalgleish)
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