NEW YORK -- Calling the performance of Mentor Graphics' management "abysmal," Casablanca Capital today called on fellow shareholders of the embattled EDA software firm to support an alternate slate of directors.

In a letter made public today, the hedge fund sharply criticized Mentor's management for its lagging share price, excessive issuance of stock, and overhead expenses well above those of its main competitors.

Casablanca is the printed circuit board and semiconductor design software company's second-largest shareholder, at 5.4%. In the letter, Casablanca called on fellow shareholders to support the nominees of Carl Icahn, who at 14.7% is Mentor's largest shareholder.

Since January, Casablanca and Icahn have formed something of a two-front attack on Mentor, consistently shelling the company with criticisms and demands. The pair insist the track record of Mentor's board and management calls for a change in approach.

In its letter, Casablanca said Mentor's price per share has fallen 18% over the past 19 years, while that of Synopsys has risen 112%, and Cadence's has jumped 292%."Over the past 19 years under current management, Mentor’s share price is down 18%, with zero return for shareholders," Casablanca wrote. "How can we support a board that is responsible for this underperformance?"

The firm also took Mentor to task for what it called excessive dilution, citing a 72% increase in shares over the past 10 years, versus 10% and 23% for Cadence and Synopsys, respectively. The greater the number of shares, the less the value of any individual share.

It continued the attack on CEO Wally Rhines, echoing Icahn's letter last week which called out the executive for pocketing $65 million from Mentor while delivering only $113 million in free cash for the company over the past 10 years. By contrast, Cadence and Synopsys have each generated more than $2 billion in free cash flow during that time, Casablanca said.

The hedge fund further criticized Mentor for generating nearly $40,000 less revenue per employee than either Cadence or Synopsys, and said Mentor's marketing and sales expenses made up 34% of its overall budget last year, 10 points more than Synopys.


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