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Major Shareholder Demands Sale of Vitesse Semiconductor

July 08, 2006|From Bloomberg News

Vitesse Semiconductor Corp.'s largest shareholder is demanding the maker of chips for computer networks be sold and accused the directors of "gross negligence."

Chapman Capital, which has a 7.3% stake in Vitesse, said the Camarillo company should be sold for at least $4.50 a share, according to a filing Friday with the Securities and Exchange Commission. Chapman's figure is about three times the current stock price.

Vitesse is in the "sweet spot" of the low-cost gigabit ethernet upgrade cycle, Chapman's filing said.

Vitesse fired its chief executive in May after the SEC and the U.S. attorney's office began probes of how the company granted stock options to executives.

Shares of Vitesse rose 24 cents, or 17%, to $1.66. The stock has fallen 14% this year.

Vitesse's board stewardship shall "be proven grossly negligent, if not fraudulent," according to a letter in the filing signed by Chapman Managing Partner Robert Chapman Jr.

Chapman, whose firm is based in El Segundo, has attacked management of companies, saying ridicule is an effective weapon. Chapman Capital has made filings on 17 publicly traded companies, waging hostile campaigns for corporate changes at 15 of them, according to the company's website.

Neither Chapman nor Vitesse Chief Executive Chris Gardner returned calls to their offices.

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