Last week, the major activist shareholders in Phoenix Technologies (PTEC), filed an amended 13-D with the SEC. We noticed several interesting tidbits in the filing, which support our continued optimism for this software turnaround play.

Notably, the filers stated:

“The Reporting Persons continue to believe that the Shares of
the Issuer are undervalued and in order to maximize shareholder value, Ramius Capital continues to be interested in acquiring the Issuer. “

As we mentioned in our initial write-up on PTEC, Ramius Capital and other major shareholders have already offered to buy PTEC for $5.05 per share. As the new SEC filing implies, this offer is still on the table. While we doubt that current management will accept this offer, given that their options are set at about the same price, the fact that PTEC’s stock is currently trading at a decent discount to the offer price implies limited downside at current prices.

In fact, PTEC reminds us somewhat of our successful foray into Stratos International (STLW), a fiber-optic turnaround play, which traded significantly beneath Steel Partners offer price for quite some time, offering investors an extremely low-risk investment opportunity in what is generally a high-risk sector. As you may already know, it didn’t take much to push STLW’s stock back up above the offer price.

Another point of interest from the amended PTEC 13-D filing, is that the activist shareholders who are now seeking board appointments, mostly bought into PTEC at much higher prices. Some major purchases were at well above $5, offering another indication that the risk in PTEC’s shares is limited at current prices.

Finally, it is also important to note that the shareholder activists in PTEC have extensive experience in the software industry, particularly in turnaround situations, giving us further confidence in the underlying value of PTEC.

For reference the two major current activists in PTEC are:

JOHN MUTCH (AGE 50). In March 2003, Mr. Mutch was appointed to the Board of Directors of Peregrine Systems (NASD:PRGN.PK) (“Peregrine”), a global enterprise software provider, to assist Peregrine and its management in development of a plan of reorganization, which ultimately led to Peregrine’s emergence from bankruptcy. From August 2003 to December 2005, Mr. Mutch served as President and Chief Executive Officer of Peregrine, during which time he restructured and stabilized its business operations and led Peregrine through its acquisition by Hewlett-Packard.

PHILIP MOYER (AGE 41) is a private investor and entrepreneur. From
July 2003 to September 2005, Mr. Moyer served as General Manager, Professional Services Industry for Microsoft Corp. (NASD:MSFT) (“Microsoft”). From July 2002 to July 2005, Mr. Moyer also served as Microsoft’s General Manager of Global Customers, during which time he was responsible for managing worldwide sales and service teams for some of Microsoft’s largest multi-national customers. From July 1999 to July 2002, Mr. Moyer was General Manager of Microsoft’s Services Organizations (Consulting, Support, Technology Specialists, and Partners) in the U.S. East Region. From 1991 to July 1999, Mr. Moyer held a variety of executive and technical positions with Microsoft.

In sum, we still believe that PTEC has little risk at current prices, and significant upside, as management, all of whom also have excellent track records in software turnarounds, continues to restructure the company to leverage PTEC’s leading position in the BIOS market.

For our initial reports on PTEC, please click here.