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Lantronix Responds in Brewing Board Battle, Supports CEO

Irvine’s Lantronix Inc. is defending its chief executive and track record as its largest shareholder seeks to wage a board battle at the networking electronics maker.

Lantronix Chairman Lew Solomon on Wednesday addressed charges from cofounder, director and largest shareholder Bernhard Bruscha that the company’s management and directors have presided over “lackluster” results and have a “lack of vision.”

Chief Executive Jerry Chase, who joined Lantronix in 2008 from Santa Clara-based video software maker Terayon Communications Systems Inc., has faced an “extremely challenging time” but has seen “notable successes” and has the board’s support, Chairman Solomon said in a Securities and Exchange Commission filing.

Lantronix makes small electronic devices that allow vending machines, thermostats, retail terminals, ATMs and other machines to be accessed via the Internet or other computers.

The company has a market value of about $30 million. Its shares are flat since the start of the year after giving up earlier gains that saw them peak at a 40% rise in May.

For the 12 months through June, Lantronix had sales of $46 million, down 5% from a year earlier. The company lost $1.5 million, widened from $780,000 a year earlier.

Lantronix has a troubled past: It was sidetracked by an accounting error that resulted in restated sales for 18 months of 2000 and 2001. Years of losses followed.

Solomon’s filing placed blame for part of Lantronix’s problems on prior chief executive Marc Nussbaum, who left in 2006.

Current chief Chase “inherited” problems and has seen successes, according to Solomon.

Those include lower expenses, higher gross profit margins, improved cash flow, enhanced products and a strengthened management team, Solomon said.

“We feel strongly that Mr. Chase and his team have earned the opportunity to implement their plans for accelerating the growth of the company,” he said.

The company’s response appears to set the stage for a board battle at Lantronix’s annual meeting, set for Dec. 15.

Bruscha, a former Lantronix chairman, is backing himself and two other candidates running for spots on the company’s nine-member board.

Bruscha’s TL Investment GMBH, based in Germany, owns 38% of Lantronix.

His slate also includes Frederick Thiel, a former Lantronix chief executive from 1998 to 2002, and Hoshi Printer, a former chief financial officer with Irvine’s Autobytel Inc.

Thiel was at the helm during Lantronix’s accounting problems.

Bruscha was a director at the time and also controls German distributor Transtec AG, which received shipments from Lantronix that later were returned after Lantronix did a stock sale.

Thiel and Bruscha were part a 2001 company probe and a subsequent SEC investigation. Neither was found to have committed wrongdoing with blamed being placed on a former chief financial officer.

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