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Activist Investor Takes Stake In Symantec, Wants 5 Board Seats, Report Says

Activist hedge fund Starboard Value believes Symantec needs operational changes to improve margins, especially in its business-facing segment, according to a report in The Wall Street Journal.

Activist investor Starboard Value has taken a 5.8 percent stake in Symantec and privately nominated five directors to its 11-person board, according to report in The Wall Street Journal.

The activist hedge fund believes Mountain View, Calif.-based Symantec needs operational changes to improve margins, especially in its business-facing segment, The Wall Street Journal reported Thursday. The stake held by New York-based Starboard is worth roughly $670 million, according to the Journal.

Neither Symantec nor Starboard Value immediately responded to requests for comment.

[Related: Symantec To Cut Staff By Up To 8 Percent As Part Of $50M Restructuring]

Starboard's proposed board slate includes a former chairman of antivirus vendor AVG Technologies, a former executive at financial software company Intuit, and three people it put on the board of semiconductor vendor Marvell Technology Group, including Starboard research head Peter Field, the Journal reported.

The hedge fund believes its board nominees could help remediate any potential financial reporting issues and improve operations, according to the Journal. Starboard believes Symantec lags behind its peers despite being one of the largest cybersecurity vendors, the Journal reported.

Symantec has since May been investigating concerns raised by a former employee around the company's reporting of certain non-GAAP measures, including those that could impact executive compensation programs. The probe by independent counsel is also examining concerns around commentary on historical financial results, stock trading plans and retaliation.

The company's stock fell $0.05 (0.27 percent) in after-hours trading Wednesday to $18.50 per share, marking the lowest trading price for Symantec's stock since June 2016. Symantec's stock has lost 34 percent of its value since the start of 2018 alone.

The challenges continued for Symantec earlier this month, with the company announcing plans to cut its global headcount by up to 8 percent or 880 employees as part of a $50 million restructuring effort. The cuts are largely meant to address stranded costs that remain after last year's $950 million sale of Symantec's website security and public key infrastructure (PKI) business to DigiCert, the company said.

Symantec also warned in its earnings call that it isn't closing as many deals as expected in its enterprise security unit, which sells to businesses and makes up roughly 60 percent of the company's overall revenue.

Starboard said on its website that it invests in "deeply undervalued" publicly traded U.S. companies, and actively engages with management and the board to help identify and execute on opportunities that unlock more value for shareholders. Symantec's market value has dropped from as much as $21 billion in 2017 to just $11.5 billion, according to S&P Global Market Intelligence.

A quarterly holdings report filed earlier this week with the U.S. Securities and Exchange Commission (SEC) indicated that Starboard has a stake in 18 companies, with Symantec not appearing on the list.

Starboard's largest holdings as indicated by the 13F filing are: over-the counter pharmaceutical company Perrigo, with a $732.1 million stake; semiconductor vendor Marvell, with holdings worth $723 million; Israeli-American computer networking vendor Mallanox Technologies, with a $460.8 million stake; and Advance Auto Parts, with holdings worth $430.8 million.

The hedge fund's efforts to sway public opinion were on display earlier this year when Starboard announced in a press release that it had put together a presentation detailing what initiatives management at Newell Brands – parent company to Rubbermaid, Coleman, and Diamond matches, among others – could implement to drive operational improvements.

Starboard owns a 3.8 percent – or $226.1 million – stake in Newell. The hedge fund, though, is probably most famous for a biting, 294-slide presentation it released back in 2014 critiquing Darden Restaurants, the parent company of Olive Garden and Longhorn Steakhouse. Just one month later, Starboard managed to win all 12 seats on the restaurant company's board of directors.

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