Blum Capital is urging EFII to return $100 million (approximately $2 a share), to stockholders through a one-time dividend, as soon as reasonably practicable. Blum had been privately advocating this dividend since the company announced the sale of its real-estate assets, which brought in approximately $100 million, after taxes. The investor favors a dividend over a share repurchase, due to the rise in EFII's share price this year and the lack of liquidity in the common stock. If this were 2007, getting the company to pay a special dividend would have been a slam-dunk. But in this economy, with the severe tightening of the debt markets, many conservative stockholders might support the company's holding on to its cash.

Hedge fund Blum Capital wants the digital-printing firm to return $100 million to shareholders via a one-time dividend. The money, Blum says, represents the after-tax equivalent of the proceeds from Electronics For Imaging's sale of California real-estate assets to Gilead Sciences (GILD) this year and is "excess liquidity." The firm said that a dividend of roughly $2.00 a share would effectively yield 18% and would be more beneficial to shareholders, and easier to implement, than continued stock repurchases. "Moreover, we note that while the company's current share-repurchase program involves fees and/or commissions, a special dividend requires no ancillary costs for the company to execute," wrote John Park, partner and co-chief investment officer at Blum, in a Sept. 28 letter to Electronics For Imaging's board. The company had about $279 million in cash and equivalents, and no debt as of June 30. Blum owns 4,619,906 shares (9.4% of the total outstanding).

Electronics for Imaging (EFII) was downgraded to Neutral, Merrill Lynch said. Company had another disappointing quarter in controllers, while inkjet continues to perform well. Estimates reduced, because of the margin sales mix.

BUY

long

Upgraded by JP Morgan from Neutral to Overweight

Downgraded by Oppenheimer from Buy to Neutral
Downgraded by CE Unterberg Towbin from Buy to Market Perform

Company continues to invest into itself through acquisitions that complement its products.