More on Tollgrade

What exactly do they do?

The company website will tell you that Tollgrade is "a leading provider of service assurance products and services for centralized test systems around the world. Tolllgrade designs, engineers, markets and supports centralized test systems, test access and status monitoring products, and next generation network assurance technologies. Tollgrade's customers range from the top telecom and cable providers, to numerous independent telecom, cable and broadband providers around the world."

What does this mean?

Near as I understand, Tollgrade's equipment allows those telephone companies they service to monitor their lines from a central office, rather than sending repairmen to test wires on location. Its four biggest customers are the regional Bell operating companies: Verizon, BellSouth, SBC, Qwest.

You can find its company history here.

Ramius' complaint is that over the past five years, ending May 13, 2009, Tollgate's stock price is down about 53%. During the same period, the Nasdaq composite is down only 10%.

The problem, in Ramius' view, is a pattern of pouring "excessive amounts of capital into research and development projects as well as ill-conceived and poorly executed acquisitions."

Obviously, R&D is important to a company like Tollgate. Most of its business is devoted to plain old telephone service (POTS), which may soon prove a historic deadend. R&D is essential to adapt the company to the new directions of the telecomm industry.

Still, Ramius presumably would say -- and will say as this dispute roils onward -- that R&D can not be so large a line item as to beggar the here-and-now operational needs of the company.