Synacor Inc., responding to a push by a pair of major shareholders to put the company up for sale, said Friday it is open to “credible proposals” but remains focused on its efforts to develop new products to build its sales.
Synacor, in its first response since a pair of dissident shareholders began challenging the company’s management earlier this month, said in a statement that its board is excited about the company’s business and its plan to develop new products that will allow consumers to access the Internet content that it produces for its clients in new ways.
“Synacor’s board, management and employees remain dedicated to our growth plans, new products and emerging market opportunities ahead,” the company said. “These strategic investments in new products are essential to future growth, and already Synacor has received strong positive responses from customers.”
Those include products that would allow consumers to access their clients’ content through a variety of mobile devices, including tablets and cellphones, with an emphasis on those that run on the Android operating system. The new products also would allow consumers to personalize their start pages and home screens.
The company also is touting its TV Everywhere product that allows consumers to access content from their cable television provider on a wide range of devices and its Cloud ID Authentication services that allow users to access content in a variety of ways.
“We are excited about our business and our strategic plan,” the company said.
But those products have taken longer to develop than Synacor executives expected and, when combined with a drop in revenues from Synacor’s traditional business base stemming from changes more than a year ago in the Windows 8 operating system, has caused Synacor to start losing money while its sales shrink.
That prompted investment firms JEC Capital Partners and Ratio Capital Management to urged Synacor’s board of directors to stop looking for a new CEO and instead hire an investment banking firm to seek out potential buyers, arguing that it is the best way for shareholders to capitalize on the underlying value of the business.
The investment firms own a combined stake of just under 10 percent in Synacor, with each owning individual stakes of about 4.9 percent. That gives the investment firms a pulpit to voice their opinions about the company’s strategy and management that can’t be ignored.
The investment firms, in a letter Thursday to Synacor’s board, said they had little confidence in the ability of the company’s management to turn the company around and raised questions about how effective the efforts to rebuild its sales base around new products would be. Instead, they urged Synacor’s board to hire an investment banker to seek offers from potential buyers.
Synacor, in its response, did not reject that possibility but also didn’t embrace it: “Our board considers and evaluates all credible proposals for business combinations and other strategic transactions.”
Synacor’s stock has fared poorly since the company went public at a price of $5 per share in a Feb. 10, 2012, initial public offering. The shares closed Friday at $2.62 – down 7 cents, but still only a little more than half of its IPO price.
Synacor lost $1.4 million last year as its revenues slid by 8 percent after a change by Microsoft in its Windows 8 operating system relegated the start pages that Synacor operates for its customers to a secondary screen that requires additional clicks for users to access. That led to an 8 percent drop in Synacor’s sales, which totaled $112 million last year, with expectations that sales will decline by another 11 percent this year to $100 million.
Synacor currently is searching for a new CEO to replace Ronald N. Frankel, who has said he plans to retire when a successor is found. The dissident investors urged the company to stop its CEO search, saying they did not feel there was a “realistic chance” for improvement under a new top executive.