Legendary hedge fund manager Robert Chapman sent a scathing letter to the board of Cypress Semiconductor, urging management to separate its core semiconductor business from its controlling stake in solar cell provider SunPower Corporation, via spinoff and LBO. Chapman, whose fund owns just over 1% of Cypress, implies in the letter that CEO Thurman Rodgers may be neglecting Cypress to concentrate on SunPower. Following a strategic review in October, Cypress announced it is not pursuing a buyout of itself or SunPower; Chapman claims Rodgers isn't selling SunPower because "such reorganization could remove from Cypress the only growth vehicle capable of vindicating his career oversight of Cypress, once and for all, as Mr. Rodgers moves into the late stages of his 40-year career." Cypress announced 3Q net income of $10.7 million on $290.2 million in revenue, but Chapman notes that the core value of Cypress declined 50% in Q4. SunPower's Q3 revenue nearly tripled y/y to $65.3 million, as the company posted net income of $9.6 million -- its second consecutive profitable quarter.
• Sources: Silicon Valley/San Jose Business Journal, EE Times
• Related commentary: Cypress Semiconductor: Undervalued and Very Appealing, Vitesse: Chapman Selling Shares; Strange Timing On 13D, SunPower Acquires PowerLight In Bid To Diversify Itself, The Short Case on SunPower, Focus on SunPower: A Clearly Successful Spin-off. Conference call transcript: Cypress Semiconductor Q1 2006
• Potentially impacted stocks and ETFs: Cypress Semiconductor (NASDAQ:CY), SunPower (NASDAQ:SPWR). ETFs: Semiconductor HOLDRs (NYSEARCA:SMH), iShares Goldman Sachs Semiconductor (IGW), PowerShares Dynamic Semiconductors (NYSEARCA:PSI), SPDR Semiconductor (NYSEARCA:XSD), PowerShares WilderHill Clean Energy ETF (NYSEARCA:PBW)
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