Shares in network software company Gigamon Inc jumped as much as 20 percent on Monday after activist investor Elliott Management reported a 15.3 percent stake and said it would speak to management about undergoing a "strategic review process."
Elliott said in a regulatory filing that Gigamon shares are significantly undervalued and it intends to encourage the company to explore options including a potential sale, according to the filing. (bit.ly/2qhlQ7H)
Gigamon makes software installed in large data centers that helps the flow of traffic and prevents bottlenecks. Some of its competitors have been acquired in recent months, such as Ixia, which Keysight Technologies Inc announced in January it would buy for $1.6 billion.
Gigamon, based in Santa Clara, California, went public in 2013.
Elliott Management, a hedge fund led by Paul Singer, now Gigamon's top shareholder, said it may also suggest potential changes in the company's operations and management, among other possible moves. Paul Hooper has been Gigamon's chief executive since 2012.
A smaller hedge fund called Foglamp Capital, said in a statement provided to Reuters that the "strategic review process that Elliott Management has recommended should unlock significant value." Foglamp managing partner Wasif Khan said that Gigamon made up 15 percent of its fund. (bit.ly/2pohy9Q)
Other test and measurement companies and networking switch companies such as Cisco Systems Inc could be potential buyers for Gigamon, as well as private equity firms, according to Stifel analyst Patrick Newton. Private equity firms targeted Ixia when it was in sales talks, Newton added in a research note. Cisco could not immediately be reached for comment.
Gigamon is latest addition to a long list of enterprise technology companies that Elliott has pushed to explore a sale. Many companies it has targeted such as Mentor Graphics, Lifelock Inc and Qlik Technologies have ended up being acquired by strategic or private equity buyers.
Elliott's broad range of investments across the tech industry is overseen by portfolio manager Jesse Cohn, who also leads its private equity investing arm, Evergreen.
Two weeks ago, Gigamon reported a loss of $2.23 million for the first quarter, compared with profit of $2.97 million a year earlier.
Gigamon stock had fallen about 23 percent this year through last Friday. On Monday, shares jumped $6.20, or 17.7 percent, to close at $41.20.
(Reporting by Liana B. Baker in San Francisco and Laharee Chatterjee in Bengaluru; editing by Bill Rigby and David Gregorio)