Icahn Issues Open Letter To Shareholders of Mentor Graphics

Rhines stated: "Icahn seeks to disguise Meyers' real track record."

Our reply: Synplicity's stock was trading at $4.98 when Gary Meyers (one of our nominees) was named CEO on 9/28/04 and the sale to Synopsys was announced for $8.00 per share on 3/24/08 (a 61% premium over the price on the date Gary was named CEO). That is Gary's track record as CEO. A record Rhines should be envious of considering Mentor's stock is now at approximately the same level it was at in 1994. The CEO is responsible for the performance of a company and ultimately makes the decisions. It is not fair to give credit or discredit an employee of a company publicly since there is no public information on specifically how that employee performed. That is why shareholders don't know how to assess the three incumbent directors we seek to replace in terms of how they performed on their last job (other than "private investor", "board director", or "industry consultant"). According to Mentor's proxy statement, Fontaine Richardson, who Rhines claims is incomparable to Gary Meyers, last held a job in 2000 - how did the venture capital fund he managed perform and what were the assets under management? What we do know is that Fontaine led the compensation committee at Mentor that paid Rhines $65 million during this period of poor performance and that Fontaine has been on the board of Mentor for 28 years - since 1983! Gary was CEO of a publicly traded peer to Mentor and stayed on as a senior executive at Synopsys (Mentor's larger peer) until April 2010. We find Rhines' criticism to be quite unfair. James Fiebiger's last job was as CEO of a private company named Lovoltech for five years from 1999 to 2004. What was the scale of the capital raised or the performance for its shareholders? What we do know about James Fiebiger is that he is the lead independent director for Mentor Graphics. However, how can he be truly "independent" when he has served on the Board with Rhines, the CEO, for 17 years (since 1994)? Marsha Congdon's last job was in 1997 as an employee of US West. Again, how can we publicly assess her performance? Look at the track records and experiences of all three of our nominees. How can Rhines insinuate that they are not qualified to serve on this Board?

Rhines states that at "BKF Capital…the company generated a negative shareholder return prior to Schechter's resignation only six months after joining the Board."

Our reply: In our opinion, rather than focus on what is relevant, Rhines seeks to discredit our nominee, David Schechter, with meaningless information. The reality that Mentor does not want to discuss is that it is David's job to co-manage an investment portfolio (including Carl Icahn's 14.3% stake in Mentor Graphics) and that portfolio is up 80% in its first year since its inception on 4/1/10. David has extensive board experience working for Carl Icahn on the boards of several of his portfolio companies that he controls or holds a minority investment. David has participated, as a director in multiple situations, to implement the methodologies and capabilities developed by Carl Icahn's organization to "cost control", leading to significant cost savings without affecting revenues. Not only is David's history as a director on the board of BKF irrelevant in our opinion but actually factually incorrect. During the approximately six months that David served on the Board of BKF Capital in 2008, the company had no operations and an equity market capitalization of only approximately $8 million; and during David's tenure on that board the stock price was approximately flat.

Rhines states: "Mentor Graphics asked Icahn and Schechter to help evaluate potential cost savings through Icahn Sourcing in 2010. Ultimately, Icahn Sourcing was unable to provide any significant cost savings solutions to Mentor Graphics."

Our reply: Rhines fails to mention that the reason Icahn Sourcing was unable to provide any significant cost saving solutions was that Mentor Graphics chose not to follow Icahn Sourcing's advice, limited the scope of such advice to relatively insignificant areas of cost spend such as small packages and cell phones, and was unwilling to study more meaningful areas of spend.

Rhines states: "Icahn's criticism of the meeting date for the Annual Meeting of Shareholders is misplaced on a number of scores. The May 12th meeting date is consistent with Mentor Graphics' historical practice. Moreover, the timing of our Annual Meeting clearly did not impede the nomination of directors by shareholders."

Our reply: Mentor's entrenched Board gave shareholders just 10 days to nominate directors. To claim our criticism of this action is "misplaced on a number of scores" is simply ridiculous to us.

Rhines states: "Icahn's assertion that our issuance of shares has destroyed shareholder value is simply wrong."

Our reply: Over the past eight years, Mentor has increased its basic shares outstanding by 64% while Synopsys reduced its share outstanding by 4% and Cadence held its share count flat. Even in the midst of a contested election, Mentor issued a convertible debt security that is significantly dilutive in the event of a change of control for cash, despite no urgency and clear alternatives. Now, only after shareholder outrage in the midst of a contested election, the Company has changed course and announced plans to repurchase shares. This Board's plan does not go far enough and Mentor should use ALL excess cash flow to repurchase shares. How can shareholders trust this Board given its track record on this subject?

Mentor Graphics needs new ideas, new blood, and a new way of thinking. Over two decades of entrenchment, this Board has lost the drive to perform. They have not been held accountable. As a result, they allowed the expenses of the Company to grow year after year without the proper systems of control in place necessary to maintain efficiency. They have allowed for outsized share dilution year after year while the shareholders suffered. We believe our nominees can bring change. We are confident that if you vote for our nominees, shareholders will no longer feel compelled to go on television and call this Company a "country club." We strongly encourage you to vote the GOLD proxy card.

Sincerely yours,


If you have any questions or require any assistance in executing your proxy, please call:


D.F. King & Co., Inc.


Shareholders call toll−free: (800) 714−3313


Banks and Brokerage Firms call: (212) 269−5550


Important Disclosures

These materials are based solely on information contained in the public domain. We have relied upon and assumed, have not attempted to independently investigate or verify, and do not assume any responsibility for, the accuracy, completeness or reasonableness of such information. No representation or warranty, express or implied, is made as to the accuracy or completeness of any information included or otherwise used herein, and nothing contained herein is, or shall be relied upon as, a representation or warranty, whether as to the past, the present or the future. These materials are necessarily based upon information available to us, and financial, stock market and other existing conditions and circumstances that are known to us, as of the date of these materials. We do not have any obligation to update or otherwise revise these materials.

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