Packeteer Mulls Semi-Hostile Bid

WAN optimization vendor Packeteer has agreed to consider a bid by a key shareholder to take over the company with a view to making major changes.

Early this morning, investment fund Elliott Associates L.P., which together with several of its subsidiaries owns 9.8 percent of Packeteer's common stock, registered a note to Packeteer's board of directors with the SEC. It's an offer to purchase Packeteer for about $5.50 per share in cash, roughly $200 million.

The letter is also a complaint about Packeteer's execution: "We believe Packeteers poor performance -- as reflected in the 37% decline of its stock price year-to-date and 67% decline over the past twelve months -- is the result of weak execution in terms of selling and developing its industry-leading products."

Packeteer's performance has indeed suffered. In its year-end financial report on Jan. 31, the company reported slightly lower revenues of $144.5 million for 2007, compared with $145.1 million for 2006. But there also was an annual net loss of $25.9 million or 72 cents per diluted share, compared to net income of $4.9 million, or 14 cents per share for 2006.

Elliott, a firm that is notorious for its aggressiveness as an institutional investor, says Packeteer has ignored repeated suggestions and pleas for action. "As you know, over the past year, we have written you numerous letters, spoken with several of you many times and talked at length with management regarding our concerns about the Company," today's letter states. "Despite our efforts, we have never received an invitation to discuss our thoughts with the Board and, more importantly, the Board has never formally addressed our concerns, which we suspect are shared by most of your other shareholders."