NetManage, Inc. (NDAQ:NETM) shares moved up $0.08, or 1.53%, to $5.32 after Riley Investment Management LLC expressed concerns with the company's operating and financial condition and recommended that the it immediately review a standing offer to acquire the company at $5.25 per share. The 6% shareholder believes that the company should no longer operate as a stand-alone public company, given their expensive public compliance costs relative its size and its operating performance over the last several years. Just how bad is it? Well, over the last 10 fiscal years NetManage’s revenues have shrunk by approximately 66% while net losses amounted to approximately $176 million. This caused the company’s stock to lose about 33% of its value throughout the last five years while the NASDAQ added 28%. Even more troubling was the fact that executive compensation rose 14% during this period, while the CEO received 486,393 options, or enough to cover around 5% of the shares during that period!

Riley Investment Management summarized the situation best in their letter attached to their Schedule 13D/A filing with the SEC:

We wish to conclude by reminding directors of their duty to maximize and realize shareholder value. All of NetManage’s directors, aside from one, have served on the board for more than 9 years and some have held seats for over 15 years. This group of directors oversaw the strategy that led to NetManage’s disappointing performance and endorsed management’s decisions during the deterioration of the last decade.  Furthermore, none of the directors aside from the CEO are major shareholders of NetManage. We therefore call on the board to change course and acknowledge that NetManage’s operational plan is not working for the benefit of its owners. We believe that the board of directors should move swiftly towards realizing the value that still exists in NetManage’s legacy customer base and recurring revenue sources, through a sale of the Company to a strategic or financial buyer. With an installed base of more than 10,000 customers, NetManage presents potential buyers with a strong stream of maintenance revenues that command an estimated gross margin in excess of 90%. Leveraging this customer base can offer strategic buyers a solid platform on which to grow additional products while utilizing a larger sales force and spreading the cost of research and development over an expanded revenue base. Alternatively, NetManage’s highly profitable recurring cash flows can offer financial and private buyers excellent returns as they eliminate the unnecessary costs of public filing, as well as what we view as excessive management compensation and under-scaled general and administration expenses currently incurred by NetManage.

Clearly, there is a strong argument for the company to put itself up for sale. A strategic buyer would be able to realize far more value than is currently reflected in the current share price. This makes NETM a stock worth keeping an eye on over the next few months!

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Flow International Corporation (NYSE:FLOW) shares moved down $0.57, or 4.57%, to $11.90 today giving up Friday's gains after the company announced its financial results and announced that CEO Stephen Light would be retiring as soon as a successor has been found. The turnaround CEO was initially hired to help the company relieve its enormous debt load, reverse the declining sales, return the company to profitability, and restore investor confidence - goals which were all since accomplished. However, the CEO was so instrumental in the success of the company that many investors are beginning to question how well the company will be able to perform without him.

Among these is Daniel Loeb's Third Point, the company's largest shareholder, who expressed their disappointment with Stephen Light's decision to leave the company in a Schedule 13D/A filing with the SEC. The hedge fund noted that they began accumulating their stake two years ago, based on their view of the fundamental strength of the company's target market and technology, and their personal confidence in the leadership of Stephen Light as CEO, based on his record of success in his previous career with much larger companies, as well as his keen analytical ability and communication skills.

Now that Light has left, Third Point believes that the company should be sold rather than continue operating independently under new leadership. Why? Well, the relatively small scale of the company's operations and its disproportionate amount of general and operating expenses (due to being a public company) means that a strategic buyer or private equity fund may be able to unlock far more value than is reflected in the current share price. Based on recent conversations Third Point had with industry participants and a financial adviser, they believe a sale could be transacted at a "significant premium". Whether this happens or not remains to be seen, however this is definitely a stock to keep an eye on over the next few months.

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Lear Corporation (NYSE:LEA) shares rose $4.34, or 12.52%, to $39.01 in early trading today after Carl Icahn's American Real Estate Partners LP made an offer to acquire the company at $36 per share in a Schedule 13D/A filing with the SEC. The proposal letter was sent on Friday evening and the terms of the deal were discussed with key senior executives over the weekend. While there are no guarantees that any transaction will ultimately result, the substantial premium paid and 17% stake Carl Icahn owns in the company both make it extremely likely.

The move comes after Carl Icahn had amassed a 16% stake in the company back in November, which he acquired at around $23 per share. He reasoned that troubled auto parts suppliers could be bought cheaply and restructured to boost profits. Lear lost $2.1 billion over the past two years, but said it planned to focus on more profitable manufacturing such as seats and electrical systems. Since receiving antitrust approval to boost his stake to 16%, the stock has risen from $23 to $33 before today's buyout at $36. This was definitely an interesting stock to follow since we initiated coverage, and we continue to follow other companies that this billionaire investors is involved with.

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