Starboard Joins Fight Over Fate of Compuware

Compuware has already spent the better part of the year fending off one activist shareholder. Now it faces another.

Starboard Value, a hedge fund, disclosed Thursday that it owns a 5 percent stake in the business software maker. It also urged the company to consider a sale or other strategic changes.

“While either outcome would be acceptable to us, we believe the company has been in strategic limbo for far too long,” Jeffrey C. Smith, Starboard’s managing member, wrote in a letter to Compuware’s management. “It is time for Compuware to either sell itself now for an acceptable premium or execute and expand upon its previously announced standalone value creation plan.”

The appearance of Starboard comes just under a year after another firm, Elliott Management, bid $2.3 billion for the software maker. Elliott, a veteran activist, is seeking to push Compuware into a sale of itself and has argued privately that a number of potential buyers have expressed interest.

Compuware rejected Elliott’s proposal in January, calling it lacking compared to its own turnaround plan, which included moves like spinning off its Covisint business communications software unit.

Last month, the company said that its revival efforts contributed to a 53 percent jump in profit for the quarter ended Sept. 30, to $16.3 million.

Starboard, which has pushed for change at companies including AOL and Smithfield Foods, isn’t necessarily endorsing a sale of the whole company. Its other proposals include a $450 million stock buyback at $10.50 to $12 a share; the sale of noncore assets; and an increase of its dividend.

“While we believe that both options could unlock significant value, it is critical for the company to analyze the risk-adjusted present value of each alternative in order to determine which alternative represents the best means for maximizing shareholder value,” Mr. Smith wrote.

But Starboard also warned that it has little faith in the company’s directors to oversee a self-help plan. The hedge fund said that it wanted to see further change to the board, such as by adding more new members and people with more experience in the software industry.