June 22, 2005
[N. D.] Reddy
Alliance Semiconductor Corporation
2575 Augustine Drive
Santa Clara, CA 95054-2914
Dear [Dam]:
I am writing to confirm certain items we discussed on June 21. B. Riley
& Co. and its affiliates have, as you know, followed the stock of Alliance
Semiconductor for many years and in the past provided published analyses and
recommendations about the ALSC stock. We no longer recommend the stock and are
not market makers, but continue to have an interest in the company.
While we have considered your view that this business can be returned
to profitability, we have observed the decline in both profits and revenues from
ALSC's traditional or "core" business and have reached the tentative conclusion
that this business is not a viable long-term enterprise for a public company. We
have discussed this previously and today we continue to believe this is in the
best interests of the shareholders.
We have acquired over 5% of the ALSC shares and will shortly be filing
a Schedule 13D to report our holdings and our views. As we discussed, we
strongly feel that ALSC should consider selling or closing its traditional
business and sell its investment holdings, distributing the proceeds to
shareholders. We believe new, completely independent directors who share the
view this course of action should be aggressively evaluated should become a
majority of the ALSC board, and want to propose to you directors who intend to
actively investigate and evaluate the course of action we favor. I would be one
of the new directors.
We believe that the selection of new directors who comprise a board
majority will clearly signal to the market and to shareholders that ALSC is
serious about evaluating and pursuing a new course of action. Our proposed new
directors recognize, of course, that if a compelling case is made for a
different approach, their views could change, and that all tax and legal
implications of the changes we have suggested need to be reviewed.
Based on our conversation, I believe you understand and are prepared to
implement the changes in board composition we seek. In this light, we want to
discuss with you our views on new directors, factors which might change our
views, and alternatives for increasing shareholder value. We hope to amicably
reach a resolution.
As a precaution, however, because the deadline for nominating a slate
of directors at the 2005 annual meeting is June 28, we presently expect to give
formal notice that we will nominate a slate of five directors at that meeting.
We also intend to discuss our views with other holders. Such discussions will be
in full compliance with the proxy and disclosure requirements of the securities
laws.
I appreciate your time to discuss these matters and look forward to
continuing our discussions.
Very truly yours,
B. RILEY & CO., INC.
Bryant Riley
Chief Executive Officer |
