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3 Jan 2007

Activist Hedge Fund calls for sale Of Sunpower.

Activist hedge fund Chapman Capital LLC announced that it has notified the Board of Directors of Cypress Semiconductor Corporation of its recommendation that Cypress reorganize via a split-off and subsequent going-private LBO transaction.

A letter from Robert L. Chapman, Jr., Managing Member of Chapman Capital, has been sent to Cypress's full Board of Directors, accused the company of under performing and called for the launch of a large-scale "corporate reorganization" that would involve splitting from Sunpower Corp, in which Cypress has held a major stake insince 2002.

The letter, calling for the sale of SunPower, says "Our long term investment in Cypress was made following passive participation in over a dozen recent conference calls and presentations, on top of countless inquiries to semiconductor and solar cell industry experts. In fact, it is our view that Cypress may be experiencing a slight, short-term order shortfall in line with others in its industry, a condition with which we are comfortable given our long term perspective."

The letter, signed by Chapman Capital's managing member Robert Chapman, Jr., claimed that since it owns 1.5 million common shares in Cypress, its financial interest the company now exceeds CEO Thurman J. Rodgers' own, Chapman cited what he called the "needlessly protracted undervaluation placed by the market on Cypress's core semiconductor operations" as fueling the hedge fund's call for a corporate reorganization that would separate Cypress' core semiconductor operations from its controlling stake in SunPower.

Regarding Chapman Capital's growing concerns regarding relatively immaterial Cypress share ownership by its Board of Directors, Mr. Chapman stated further, "Cypress's core semiconductor business, which Mr. Rodgers founded nearly 25 years ago, deserves a much higher valuation than what it was ascribed the day Mr. Rodgers took it public two decades ago. Mr. Rodgers has stated publicly, 'you and I are going to make as much money as fast as we can on this.' Cypress's Board of Directors, despite their insignificant percentage ownership of Cypress, should expect that we are going to hold Mr. Rodgers to this promise."

Chapman Capital L.L.C. is a Los Angeles, CA based hedge fund focusing on takeover and turnaround investing. The firm currently manages over $300 million as the registered investment advisor to Chap-Cap Partners II Master Fund, Ltd. and Chap-Cap Activist Partners Master Fund, Ltd., the combined owners of approximately 1% of Cypress Semiconductor Corporation's common shares.

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