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Meet Jesse Cohn, The 33-Year-Old Hedge Fund Investor Laying Siege To Silicon Valley

This article is more than 10 years old.

In 2006, a 26-year-old senior tech analyst at a hedge fund walked into the office of a stressed out Harry Knowles and told the then 76-year-old CEO of Metrologic Instruments that he needed to sell the bar-code scanning systems maker he founded to a private equity firm. The hedge fund that employed Jesse Cohn, Elliott Management, was Metrologic’s second biggest shareholder, but that was not the only reason that Knowles listened to the young Cohn. “He said, ‘Harry, look at your strategic situation, you don’t have any choice,’” recalls Knowles. “Jesse understood the problems and the solutions.”  Cohn brought in buyout shop Francisco Partners, which together with Elliott Management purchased the company in a $440 million deal. Less than two years later, Elliott Management and Francisco Partners sold Metrologic to Honeywell for $720 million. “Jesse was the absolute key thinker and implementer who put the deal together in such an intelligent way,” says Knowles.

At the time, few people in the tech world took much notice of the young analyst who changed the course of Metrologic. It was Cohn’s first big activist move in the tech sector. Eight years later, however, Cohn is in full battle mode and making his presence widely felt in Silicon Valley, a place that has traditionally been suspicious of fast-money New York traders and resisted their influence. The tech world has long been largely shielded from people like Cohn, but now Silicon Valley is learning his name. With $23 billion under management, Elliott Management is armed with a huge war chest and Cohn, now 33, is squarely focused on shaking up Silicon Valley, which probably leaves him little time to pursue his other favorite hobby: martial arts fighting. He has already launched activist campaigns this year against two Silicon Valley companies, Riverbed Technologies and Juniper Networks.

"It's a lot like cancer, it's everywhere but you never think it's going to happen to you," says a high-level Silicon Valley banker. "A lot of people in tech don't take him seriously and some of those people now aren't running their companies anymore." Says Dipanjan “DJ” Deb, founder of Francisco Partners, the San Francisco tech buyout shop: “I am not sure all Silicon Valley companies like Jesse, but I like Jesse personally. He is a smart guy who has a useful function in capital markets.”

Cohn has emerged as an important player at Elliott Management, the activist hedge fund founded by billionaire Paul Singer. Cohn declined to comment for this article. He grew up in Long Island—Baldwin, N.Y.— and graduated from the University of Pennsylvania’s Wharton School in 2002, where he dabbled as a computer programmer while studying finance. Cohn joined Elliott in 2004 after spending two years as a junior investment banker at Morgan Stanley. At Elliott Management, Cohn has climbed steadily and he now manages technology investments for the hedge fund while also heading all U.S. equity activism, according to his LinkedIn page

Cohn has had a busy year already in 2014. Last month, Elliott Management launched a $3.1 billion takeover offer of Riverbed Technology, a San Francisco computer networking company. “Riverbed’s valuation has been impaired by slowing growth in its core WAN optimization market and by significant investments in both acquisitions and operating expenses undertaken to diversify away from the core WAN optimization business,” Cohn wrote in a letter to Riverbed’s board. On the surface, it seems like Cohn is trying to put Riverbed in play for other potential acquirers. In his letter, Cohn said Elliott Management, which recently purchased 10.4% of Riverbed, would be willing to pay $19 a share and met with Riverbed CEO and co-founder Jerry Kennelly, who “had not indicated a desire to explore the significant acquisition interest of numerous potential bidders.” Riverbed’s board has formally rejected Cohn’s offer.

The day after making the Riverbed offer, Cohn struck a deal with Compuware that will see Elliott Management work with Compuware to nominate an additional two directors to the board of the Detroit-based software company. In return, Cohn and Elliott, which is the largest shareholder of Compuware, agreed not to launch another buyout of Compuware for several months like the takeover effort Cohn made last year that Compuware rejected. “The last twelve months have seen enormous progress made toward efficient operations, a streamlined portfolio and a shareholder-friendly capital return program,” Cohn said in a statement put out by Compuware. “More important, Compuware has put in place the kind of initiatives that leave it strongly positioned to keep delivering value to shareholders.”

Days after the new Compuware development, Cohn announced his next target: network equipment company Juniper Networks, Silicon Valley’s most generous employer that is known for paying its people well. Only days into his new job as Juniper Networks’ CEO, Shaygan Kheradpir was greeted with Cohn announcing that Elliott had taken a 6.2% stake in Juniper Networks and a 28-page presentation Cohn prepared calling for the company to launch a $3.5 billion share repurchase program, reduce expenses by $200 million, and focus only on projects and areas where Juniper has clear competencies. “Investors and Street analysts have been calling for Juniper to implement these value-creation initiatives for years, and we believe the three-pronged approach laid out in today’s presentation would be very well received,” said Cohn, who attacked Juniper’s outsized cost structure. Not long after Cohn unleashed his letter, another major activist hedge fund, Jana Partners, disclosed its own 6.2% stake in Juniper and repeated Cohn’s calls for cost cuts and stock buybacks.

For years, tech and Silicon Valley were left alone by the activist hedge fund managers in New York who like to buy minority stakes in companies and agitate for change. The activist money managers found tech to be too difficult and complex, an industry where financial engineering is uncommon and the next category killer product is always looming around the corner. The Silicon Valley crowd often viewed the activist hedge fund managers as short-term traders looking for a quick score as opposed to building long-term value. With the exception of Carl Icahn’s move on Motorola, which turned out to be a huge success, companies that operated in areas like networking and communication equipment or IT hardware did not have to worry about an activist investor showing up on their doorstep. More recently, activist investors like Dan Loeb, David Einhorn, Jeffrey Ubben and Icahn have shook things up at tech companies like Yahoo, Apple and Microsoft. But tech activism remains relatively rare and largely focused on consumer products companies.

That is not the case with Elliott Management. In addition to Riverbed, Compuware and Juniper Networks, Cohn has launched activist campaigns against tech companies like NetApp, Brocade, BMC Software and Novell.  In total, he has steadily conducted some 30 activist campaigns against tech companies. Cohn has built a relatively large tech team at Elliott Management, which includes former private equity professionals specializing in tech who work for him as analysts, former tech CEOs working on a consulting basis and even an engineer who evaluates products, says a person familiar with Cohn’s operations.

Elliott has been attracted to the tech arena because of relatively low valuations in the sector and cash building up on the balance sheets of tech companies. In addition, institutional shareholders in the tech space that traditionally would have been hostile to activist tactics are now more willing to embrace a hedge fund raid. Even tech CEOs are more ready to implement share buybacks as their industry matures if nudged the right way. Still, you have to know what you are doing. “For other people, there is a learning curve, but for Elliott, and Jesse in particular, he has more of a comfort level ready,” says William Choi, a tech industry analyst at Janney Montgomery Scott. “You can’t ignore the fact that you have a guy who has become more of an expert in this area within an activist shareholder who sees an opportunity.”

At NetApp, for example, Cohn saw billions of dollars on the balance sheet of the data-storage company based in Sunnyvale, Calif, and built a nearly 5% stake at the start of 2013. Cohn applauded in May when the company decided to increase its stock buyback program by $1.6 billion and issued a quarterly dividend of 15 cents a share. “We commend the positive steps taken by NetApp today to improve both the capital and cost structure at the company,” Cohn said in a statement at the time. NetApp’s stock soared by 30% from May to September 19. Elliott sold about a quarter of its NetApp stake in the third quarter of 2013, leaving it with about a 3% stake in NetApp at the end of September.

In 2010, Cohn pushed Novell to sell itself for $2.2 billion to Attachmate by having Elliott, which owned 8.5% of Novell, offer to buy the software maker for some $2 billion. “Over the past several years, the company has attempted to diversify away from its legacy division with a series of acquisitions and changes in strategic focus that have largely been unsuccessful,” Cohn wrote to Novell’s board when Elliott made its offer. “As a result, we believe the company’s stock has meaningfully underperformed.” As part of the deal, Elliott Management became a shareholder of Attachmate and Cohn joined Attachmate’s board. It was after the Novell deal that Elliott Management, under Cohn, really ramped up its efforts in tech land.

When Cohn got Elliott to take a 7.7% activist stake in BMC Software some of the company's advisers initially laughed at Cohn, says one tech banker. But Cohn managed to push the company into a $6.9 billion sale to private equity firms Bain Capital and Golden Gate. After the deal was announced, Elliott negotiated to roll part of its shares over and keep a stake in the company after it went private. Cohn seemed pretty satisfied with the outcome, saying in a statement that BMC “delivered a great outcome to shareholders with the sale transaction.” Nobody is laughing at Cohn now.

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