Disgruntled shareholders want StorageTek sold

It could be the end of the line for storage industry pioneer Storage Technology (StorageTek). An influential group of investors wants the company sold due to its poor performance.

Together, the group of disgruntled shareholders own approximately 7.4 per cent of StorageTek.

These shareholders filed a statement with the Securities and Exchange Commission saying they "have been and continue to be extremely disappointed in the financial performance of the Issuer (StorageTek)."

The investors sent a letter to the company's board of directors expressing their view that, "(StorageTek) management has failed to create shareholder value while its competitors have prospered." The letter also "urged the Board to adopt a plan to seek a sale or strategic combination of (StorageTek)."

According to Gary Ferguson, senior public relations representative for StorageTek, the group of unhappy investors represents just a fraction of the company's shareholders and their opinions will not necessarily be taken into account.

In July, StorageTek reported a second quarter net loss of US $38.5m or 38 cents per share. This came despite revenues of US $654.4m, which is a 21 per cent increase from the same quarter last year. According to the company, the loss resulted from a one-time pre-tax charge of US $102.6m caused by "pending patent litigation and an employee voluntary separation and restructuring program".

Without the one-time charge, the company would have earned US $27.2m for the quarter compared to US $54.4m a year ago.

Those losses have hit the company's share price. Wednesday it closed at nearly $22 and has been as high as $41 in the last twelve months. The price has gone in the opposite direction of the storage hardware company, EMC, which closed at $72.5 Wednesday and has been as low as almost $21 in the last year.