Warwick Valley Telephone Company (NDAQ:WWVY) shares moved up $0.39, or 2.41%, to $16.59 in early trading today after Santa Monica Partners demanded that the company immediately put itself up for sale in a letter to the company's board of directors. The 2.4% shareholder had sent letters to the company in the past recommending a similar course of action since the company clearly cannot compete with other well-funded cable and internet competitors with enormous economies of scale. Meanwhile, the company's senior management have all resigned along with certain board members while more than 20% of its employees have been laid off. Compounding the problem is today's late K-1 filing which further highlights the company's declining margins as losses continue to mount. Not only is there no plan in place to turn the company around, but only interim management available to implement any such plans.

The hedge fund then points out why a sale may be in the best interest of shareholders. Hector Communications, one of the company's competitors, recognized the competitive threat it faced and decided to put itself up for sale in November 2006. The company ended up being sold for $36.40 in cash, a gain of 160% from the $14 per share level at which the company's stock was trading at in November 2003. Surely a sale at a premium like this would be preferrable to the steady decline we've been seeing at Warwick for several years now. Santa Monica then urged the board of directors to remember its fudiciary duty to shareholders, even though they personally do not have much at stake in the company. If the board of directors decides to consider the possibility of a sale, it could mean significant share appreciation for investors - this makes WWVY a stock worth watching!

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