A small but highly aggressive US fund management company is threatening to stir up trouble for Storage Technology Corp, the $2bn a year Louisville, Colorado-based data storage specialist and hard disk drive pioneer. Relational Investors Inc, a money management firm based in San Diego, California, with around $300m of funds under its control, has acquired a stake in StorageTek of around 4% and is now seeking to bully the company’s board of directors into a $1bn stock repurchase program by threatening to vote incumbent directors out of office if they don’t do as they’re told. StorageTek had liquid funds of $601m at the end of June, but its stock price has significantly under performed the S&P 500 index this year. Relational feels that a buy-back is the preferable course of action for StorageTek’s huge cash pile, which it says is at least $500m in excess of what the company needs. Relational estimates that under its proposed scheme, the stock price would be lifted to at least $74 from its current $54 level. If the StorageTek board doesn’t undertake a buy-back soon, Relational is threatening to start a proxy fight whereby it will attempt to assemble enough support from other shareholders to vote the current directors out of office and replace them with more sympathetic ears. StorageTek already has plans to buy back 1.5 million shares this year but this is only intended to cover dilution from existing employee share option schemes. A spokesperson for Storage Technology refused to comment on the developments.
