Investor Leans on Sybase

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One of Sybase' top investors last week made public a letter he sent to the software maker's chief executive, in which he demanded a series of major strategy changes at the company. It wasn't pretty.

Sybase, which makes database and mobility software, has seen its stock price hovering between $21.80 and $26.60 per share for the last year. Thomas Sandell, CEO of Sandell Asset Management, revealed a 6 percent ownership in Sybase last week and said, in the letter to CEO John Chen, that the company should be doing better:

To be frank, the time for discussion has passed and the time for action has arrived. The company cannot continue to be complacent about its continued discounted valuation. As large shareholders and fiduciaries, we cannot sit idly while there are several actions that management and the board can take, some more immediately than others, to improve the company's valuation. . .

Sandell all but demands that Sybase start buying back shares and spin-off the company's mobility business in a separate initial public offering.

". . . (W)e believe the actions above would be expected to result in a stock price in the range of $28 to $39, an increase of 23% - 60% over the current share price. Importantly, this value increase can be achieved with a low level of risk," Sandell wrote.

Chen wrote back to Sandell on Monday:

Dear Mr. Sandell —

We have received your letter dated October 12, 2007, and we appreciate your thoughts in connection with Sybase.

Our Board of Directors regularly reviews the subjects in your letter, including use of cash, configuration of the business, and other strategic opportunities to drive shareholder value.

Sybase welcomes the views of its shareholders, and the Board will consider your letter in that regard.


John S. Chen

CEO Chen then followed up with a note to Sybase employees, according to Sybase' SEC filing: "Let me assure you that our focus today, as it always has been, is on building our business and creating value. It is because of you — Sybase's hard working and dedicated employees — that Sybase has been so successful. We must continue to do what we do best in providing our customers with superior products and services. Lastly, I would like to remind you about our procedures for responding to outside inquiries. If you receive any investor or analyst inquiries, please forward them to Charlie Chen, Senior Director of Investor Relations. . . "

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