A New York-based investment fund has taken an 11.3% stake in Tustin-based Cherokee International Corp., saying it believes the electronics company is undervalued.
In a filing with the Securities and Exchange Commission, Steel Partners said it might continue to up its stake in Cherokee.
Steel said it could seek changes to Cherokee’s board, capitalization, ownership or operations, and even short sell or hedge the company’s shares.
Cherokee, a maker of power supplies for computers and other electronics, has had problems lately.
In May, the company reported that sales in the first quarter fell 13% to $32 million. Net income fell more than 70% to $600,000, short of analysts’ estimates.
The company blamed lower than expected demand for its data communications products and delays in material deliveries, among other things.
One analyst even called for the company to sell. Michael Walker, an analyst with Credit Suisse First Boston in New York, downgraded the stock from “neutral” to “underperform.”
In a research note, he said Cherokee has been losing sales from its top customer Nortel Networks Corp., and that the company is losing market share elsewhere.
“We believe (Cherokee’s) best strategic option at this point is to find a buyer,either a competitor or a larger supply chain company seeking to vertically integrate,” he wrote.
