Hedge funds challenge a rare Philly tech success
It's not enough that hedge fund managers have lately pushed DuPont, Pep Boys, Mondelez (Nabisco), and other big old-line Philadelphia-area employers to sell, slim, or shut operations here.
It's not enough that hedge fund managers have lately pushed DuPont, Pep Boys, Mondelez (Nabisco), and other big old-line Philadelphia-area employers to sell, slim, or shut operations here.
The hedgies are now chasing the region's handful of successful tech companies.
Qlik Technologies, a Radnor-based, 2,000-worker data-visualization software company that helps clients sort masses of customer data, has been targeted by veteran corporate raider Paul Singer's Elliott Management Corp. and allied hedge funds.
Singer's tech targets last year included business software makers EMC, which, under pressure from Singer, agreed to combine with Dell in a $67 billion merger; Citrix Systems, which agreed to replace its CEO and board; and Informatica, which agreed to be sold.
Qlik shares jumped Thursday after Elliott said it had bought nearly 9 percent of the company - worth over $200 million - and was pushing Qlik boss Lars Bjork and his board to make "strategic" and "operational" changes. I'll translate:
"Operational" change is when you replace managers, shut down facilities, and/or fire people.
"Strategic" change is when David accepts a pile of shekels from Goliath and hands his slingshot to the giant's fellow Philistines.
A Qlik spokesman would say only: "We look forward to talking with Elliott, as we do all of our significant shareholders."
At least seven of Qlik's 15 largest investors are hedge funds, carnivorous firms that need to eat large profits from each company they catch so they can pile up profits and justify their high fees.
The other Qlik owners are mostly mutual funds, laid-back omnivores that are more likely to let company managers do their thing, even when markets head south, because their business model is based on lower fees and average returns.
One veteran hedge-fund officer agreed to discuss Qlik if I keep his name out.
Qlik "is like a lot of other tech firms run by engineers," who build great products, sell them fast, but had a tough time squeezing higher profits after sales grew past a few hundred million dollars a year, he told me.
Qlik's sales have doubled, to more than $50 million a month, since 2011. But profits have turned to losses. So the stock is trading in the $20s, down from the $40s last summer. It closed at $26.22 after a slight retreat on Friday.
Expenses are high. Qlik's engineering is in Bjork's native Sweden; sales and marketing are in Radnor. "Half the company here, half the company there. That's just not a normal setup," the investor said.
He compared Qlik "to an old mansion on Rittenhouse Square:" Well-built, valuable location - but falling behind on maintenance. In the right hands, it could be so much more.
Could you fix Qlik with a few new hotshot bosses? "We could renovate. Or we could just sell it," which would be easier, he said. "We'll get a great price." Oracle, SAP, Microsoft, and IBM all "play in this space," and any of them could pick up "little" Qlik for $3 billion, throwing its products into the arsenal pushed by their marketing and sales armies.
215-854-5194@PhillyJoeD