United States Securities and Exchange Commission EDGAR Filing

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AYjw0IJlGSFcMIGheh6koSomY/824dRTkIHH1Rq7eQuS5xp4OH1YSiabzQVX5Kqf KBEscdwYuE2FOpnec21oyA== 0001116502-07-002216.txt : 20071204 0001116502-07-002216.hdr.sgml : 20071204 20071204093110 ACCESSION NUMBER: 0001116502-07-002216 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20071204 DATE AS OF CHANGE: 20071204 GROUP MEMBERS: BRYANT R. RILEY GROUP MEMBERS: RILEY INVESTMENT MANAGEMENT LLC GROUP MEMBERS: RILEY INVESTMENT PARTNERS MASTER FUND, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NETMANAGE INC CENTRAL INDEX KEY: 0000909793 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770252226 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-43535 FILM NUMBER: 071282213 BUSINESS ADDRESS: STREET 1: 10725 N DE ANZA BLVD CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4089737171 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Riley Investment Partners Master Fund, L.P. CENTRAL INDEX KEY: 0001385084 IRS NUMBER: 000000000 STATE OF INCORPORATION: E9 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 11100 SANTA MONICA BOULEVARD STREET 2: SUITE 810 CITY: LOS ANGELES STATE: CA ZIP: 90025 BUSINESS PHONE: (310) 966-1445 MAIL ADDRESS: STREET 1: 11100 SANTA MONICA BOULEVARD STREET 2: SUITE 810 CITY: LOS ANGELES STATE: CA ZIP: 90025 SC 13D/A 1 netmsc13da9.htm SC 13D/A United States Securities and Exchange Commission EDGAR Filing

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-2-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND
AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)

(Amendment No. 9)¹

NetManage, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

641144308

(CUSIP Number)

Bryant R. Riley

Riley Investment Management LLC

11100 Santa Monica Blvd.

Suite 810

Los Angeles, CA 90025

(310) 966-1445

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

December 4, 2007

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box: £

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.

(Continued on following pages)

———————

¹The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No. 641144308	13D	Page 2


1	NAME OF REPORTING PERSON S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON Riley Investment Partners Master Fund, L.P.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X]
3	SEC USE ONLY
4	SOURCE OF FUNDS* WC
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6	CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands
NUMBER OF SHARES		7	SOLE VOTING POWER 645,400
BENEFICIALLY OWNED BY		8	SHARED VOTING POWER -0-
EACH REPORTING		9	SOLE DISPOSITIVE POWER 645,400
PERSON WITH		10	SHARED DISPOSITIVE POWER -0-
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 645,400
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.7%¹
14	TYPE OF REPORTING PERSON* PN

———————

Based on 9,581,012 shares of common stock of NetManage, Inc. (“NetManage” or the “Issuer”) outstanding at November 8, 2007, as reported in NetManage’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 filed with the Securities and Exchange Commission on November 11, 2007.


CUSIP No. 641144308	13D	Page 3


1	NAME OF REPORTING PERSON S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON Riley Investment Management LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X]
3	SEC USE ONLY
4	SOURCE OF FUNDS* AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES		7	SOLE VOTING POWER 645,400¹
BENEFICIALLY OWNED BY		8	SHARED VOTING POWER 71,291²
EACH REPORTING		9	SOLE DISPOSITIVE POWER 645,400¹
PERSON WITH		10	SHARED DISPOSITIVE POWER 71,291²
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 716,691
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.5%³
14	TYPE OF REPORTING PERSON* IA

———————

Because Riley Investment Management LLC has sole investment and voting power over 645,400 shares of Common Stock owned by Riley Investment Partners Master Fund, L.P., Riley Investment Management LLC may be deemed to have beneficial ownership of these shares.


CUSIP No. 641144308	13D	Page 4


1	NAME OF REPORTING PERSON S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON Bryant R. Riley
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X]
3	SEC USE ONLY
4	SOURCE OF FUNDS* AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6	CITIZENSHIP OR PLACE OF ORGANIZATION California
NUMBER OF SHARES		7	SOLE VOTING POWER 645,400¹
BENEFICIALLY OWNED BY		8	SHARED VOTING POWER 71,291²
EACH REPORTING		9	SOLE DISPOSITIVE POWER 645,400¹
PERSON WITH		10	SHARED DISPOSITIVE POWER 71,291²
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 716,691
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.5%³
14	TYPE OF REPORTING PERSON* IN

———————

Because Riley Investment Management LLC has sole voting and investment power over Riley Investment Partners Master Fund, L.P.’s security holdings and Mr. Riley, in his role as the sole manager of Riley Investment Management LLC, controls their voting and investment decisions, Mr. Riley may be deemed to have beneficial ownership of the 645,400 shares owned by Riley Investment Partners Master Fund, L.P.

Riley Investment Management LLC has shared voting and dispositive power over 71,291 shares of Common Stock owned by an investment advisory client of Riley Investment Management LLC in an account indirectly affiliated with Mr. Riley. Mr. Riley, in his role as the sole manager of Riley Investment Management LLC, controls Riley Investment Management LLC’s voting and investment decisions for its investment advisory clients.


CUSIP No. 641144308	13D	Page 5


CUSIP No. 641144308	13D	Page 6

Item 4.

Purpose of the Transaction

Item 4 is hereby amended by adding the following:

On December 4, 2007, RIM sent a letter to the Issuer. In the letter, RIM detailed its concerns about the motivation, decision-making and disclosure of Zvi Alon (the Issuer’s Chairman, President and CEO) and the Board of Directors. In particular, RIM described concerns with respect to the Issuer’s disclosure of a January 17^th acquisition proposal, which was disclosed three business days prior to the expiration of RIM’s partial tender offer, and the Issuer’s third quarter conference call. RIM also described concerns with respect to Mr. Alon’s compensation, director Shelly Harrison’s independent services agreement with the Issuer and the Issuer’s severance and retention plan. RIM urged the board to retain a banker and to auction the company as expeditiously as possible. RIM also demanded that the Issuer allow its shareholders to determine whether any acquisition offers are economically viabl e. The foregoing description of the letter is qualified in its entirety by reference to the letter attached as Exhibit A.

Item 5.

Interest in Securities of the Issuer

Item 5(c) as previously filed is hereby amended as follows:

(c)

The following are transactions effected in Common Stock by the Reporting Persons in the past 60 days: In October 16, 2007, an investment advisory client acquired 47,939 shares of common stock at a per share price of $4.1.

Item 7.

Material to be filed as Exhibits

Exhibit A Letter, dated December 4, 2007, from RIM to the Board of Directors of the Issuer.


CUSIP No. 641144308	13D	Page 7

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Date: December 4, 2007


		Riley Investment Management LLC


		By:	/s/ Bryant R. Riley
			Bryant R. Riley, Managing Member


		Riley Investment Partners Master Fund, L.P.
			By: Riley Investment Management LLC, its General
		By:	/s/ Bryant R. Riley
			Bryant R. Riley, Managing Member

		By:	/s/ Bryant R. Riley
			Bryant R. Riley

EX-99.A 2 exhibita.htm LETTER United States Securities and Exchange Commission EDGAR Filing

Riley Investment Management LLC

11100 Santa Monica Boulevard, Suite 810 Los Angeles, CA 90025

Phone (310) 966-1445 Fax (310) 966-1096

December 4, 2007

Board of Directors

NetManage Corporation

20883 Stevens Creek Boulevard

Cupertino, California 95014

Gentleman:

Riley Investment Management holds a 7.5 percent stake in NetManage. While this is a significant percentage, we must state at the outset that this investment is in no way a reflection of our confidence in the decision-making abilities of Chairman, President and Chief Executive Officer Zvi Alon or the Board of Directors. In fact, we have serious concerns about Mr. Alon’s and the Board’s motivation and disclosure, each of which will be addressed in detail below. We believe that shareholders will be best served, and value most appropriately realized, through an immediate auction of the company in which we believe NetManage could garner bids of between $5 to $6 per share, or a 25 percent to 60 percent premium to current trading prices.

Under no uncertain terms, your shares are undervalued. The market is currently valuing your business for approximately $10 million dollars or approximately 0.4x maintenance revenue. Our analysis suggests that an acquirer would pay at least 1x-1.5x this recurring revenue stream. However, we believe the shares currently reflect a “management discount” based on the company’s disappointing history and concern that the current Board and management team does not share the current equity holders sense of urgency and realization that NetManage will continue to struggle under the burden of large operating expenses and narrow product line.

Quite frankly it is fascinating to us the position you have taken with your shareholders. It is our belief that none of your largest holders support your independent strategy. In fact, if it was not for your onerous bylaws, we would immediately call a special meeting for the purpose of removing all of your directors. We have a high degree of confidence that we would win and in fact would appreciate this opportunity if you are inclined to amend your bylaws.

The events surrounding our partial tender offer in December of last year warrant a review and are disconcerting to us. On December 20, 2006, we commenced a partial tender offer for up to 1,296,890 shares of NetManage at $5.25 per share, with a scheduled expiration date of January 22, 2007. This was not only at a 6.5 percent premium to the closing stock price of $4.93 on December 6, 2006 (the last trading day before the announcement of the intention to make the tender offer) but also represents a 38% premium to the closing price on November 27, 2007. On January 17^th, THREE business days prior to the expiration of RIM’s tender offer, NetManage indicated that it had received a proposal to acquire the company through a merger transaction at a price per share in cash in excess of RIM’s partial tender price of $5.25. The timing of this disclosure, days before the scheduled expiration of RIM’s t ender was fortuitous. Why would anyone tender into a $5.25 bid when there is a possible acquisition coming at a higher price shortly? Unfortunately, three months later, buried in a press release announcing the first quarter earnings release date we found out that discussions had been “suspended”. Shareholders were given no other explanation about who suspended them or for what reason they were suspended.

We would urge Board Members to review the company’s third quarter conference call held on October 12, 2007 for an example of the current frustration of shareholders with the disclosures being provided to the owners of the Company. In response to a question regarding attrition in the sales organization, Mr. Alon was not forthright, and his ambiguous and roundabout way of answering questions on topics as basic as SOX 404 expenses underscores the lack of full disclosure that investors are entitled to.

Equally disconcerting to shareholders is that we believe management is being very well compensated while shareholders have suffered through NetManage’s poor share performance. Not only are shares down by over 25 percent year-to-date, but also they are significantly below trading levels four years ago. Based on information contained in the most recent proxy statement, Zvi Alon earns a salary of $475,000. Given his performance, this can be viewed as a special dividend to only him using shareholder funds. In addition, in the most recent 10Q filed on November 9, 2007, it was disclosed that the company entered into an independent services agreement with Board member Shelly Harrison, whereby Harrison receives $150,000 per year and was granted 100,000 shares of stock. Moreover, according to the same regulatory filing, in October, 2007 the Compensation Committee approved a severance and retention plan for 16 persons, comprised of the CEO, oth er executives, and other employees, which awarded stock option grants vesting over the next two years and cash bonuses paid out over the next two years. The cash bonus is 25 percent of base salary for the first year and 50 percent of base salary for the second year. The severance and retention plan enriches management with cash compensation while shareholders are diluted by option grants. These levels of compensation may incentivize management and the Board to remain an independent company, despite its small size, high public legal and accounting costs and consolidation within the industry. This enforces our view that an auction process for the company is the sole strategic direction management and the Board should be taking.

RIM implores management and the Board to critically re-evaluate its past, present and future actions, remembering always that their obligation is to the shareholders, to whom

they are fully accountable. For our part, we plan to closely monitor your actions and hold you directly accountable for decisions that you make and disclosures that you may or may not provide. Accordingly, we ask you to retain a banker and auction the company as expeditiously as possible. If there are parties who have expressed an interest to you in acquiring all or part of the company, we demand you allow shareholders to decide whether or not any offers are economically viable. Should you have any questions pertaining to our position, please feel free to contact me directly.

Very truly yours,

Bryant Riley

Riley Investment Management LLC

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