wall street nuggets

NITROMED INC [NTMD] jumped 19.7% closing at $2.92 (Pharma, 6x volume) with no apparent news events. Given the company’s continued relatively high dependence on BiDil and the fact that BiDil XR (Extended Release) is not yet approved, it would not appear that profitability is on the horizon. It is curious to note that the company’s efforts to apply its nitric oxide technology in developing new pharmaceuticals might lead to some synergy with a company like TERRA INDUSTRIES, which engages in the production of nitrogen products for the agricultural market (i.e. fertilizers), and that TERRA is also up rather mysteriously, but this seems like a real stretch.

TERRA INDUSTRIES INC [TRA] rose 12.1% closing at $13.39 (chemicals, 3x volume). While there was no specific news this week other than the debt restructuring efforts announced on Business Wire on Wednesday, there was some intense buying pressure between the opening bell and 1:12 pm, that is hard to explain. The recent insider selling does not seem like a good sign. As noted above, the NITROMED move is also mysterious.

APPLIED DIGITAL SOLUTIONS INC [ADSX] jumped up 12% closing at $2.14 (2.5x volume) with most of the move coming about mid-day. Seems to be fallout from the BusinessWeek.com article on RFID (radio frequency identification device) technology featuring two companies, DIGITAL ANGEL (55% owned by ADSX) and VERICHIP (100% owned by ADSX).

ALKERMES INC [ALKS] was up 8.5% closing at $15.37 (Pharma, 3x volume) probably on some buyout speculation, but be careful. We are still waiting on financial details regarding the collaboration with ELI LILLY AND CO. [LLY] regarding the manufacturing agreement for AIR® Inhaled Insulin.

NAPSTER INC [NAPS] jumped 7.9% closing at $4.12 (Software, 13x volume) after announcing that it will become the exclusive music subscription provider for Time Warner’s AOL Music in a deal estimated to be worth about $15 million. NAPSTER will replace AOL MUSIC NOW® and will involve the migration of approximately 350,000 paid subscribers. It appears the migration should be seamless for current subscribers.

OWENS ILLINOIS INC [OI] surged 7% closing at $21.55 (Manufacturing, 4x volume) after announcing that it had retained Goldman Sachs as a financial advisor in reviewing strategic options, including a possible sale, for its plastics packaging business. With revenue of about $770 million for the 12 months ended September 30^th, it is believed the plastics packaging unit could bring in between $1.6 and $1.8 billion.

ADVANCED MICRO DEVICES INC [AMD] was down 9.5% closing at $18.26 (5.3x volume) after announcing results for the fourth quarter ended December 31^st. Excluding ATI-related sites, revenue is expected to increase just 3%. While fourth quarter income is expected to be positive, it is expected to be substantially lower than in the third quarter, due primarily to lower microprocessor selling prices that are more than offsetting increasing unit sales. The stock was downgraded by Citigroup, Prudential and Bear Stearns.

SCP POOL CORP [POOL] sank 10.4% closing at $36.35 (14x volume). This appears to be more collateral damage from declining residential construction. There is likely to be some more downside, especially given the apparent lag effect, so it appears prudent to wait for the P/E ratio to come down more. Relative to the rest of Construction, [POOL] looks awfully expensive. Avondale Partners downgraded the stock from “Market Outperform” to “Market Perform.”

RC2 CORP [RCRC] tumbled 11.7% closing at $39.31 (10x volume) after reporting lower than expected fourth quarter and year-end preliminary net sales. Increasing zinc costs are resulting in lower margins. In order to focus on its higher growth infant products and children’s toys categories, the company decided last month to discontinue its automotive collectibles business and expects to record a non-cash impairment charge in the range of $6 to $9 million in the fourth quarter. Robert W. Baird downgraded the stock from “Outperform” to “Neutral.” Given a rather low P/E ratio of 15.8 and double digit growth in the infant products and children’s toys categories, this looks reasonable attractive at this level.

VOLT INFORMATION SCIENCES INC [VOL] slid down 16.1% closing at $53.00 (10x volume) with no real news events. P/E ratio of 32.2 still seems high for 7.4% growth in sales reported in today’s 10-K for the year ended October 29, 2006.

The average member of the SigmaInverse Universe posted a gain of 0.73% on Friday, with a strong 64.1% of the members posting positive returns, 32.4% posting negative returns, and 3.5% unchanged. Unusual sector moves were seen in Mining (up 3.7%), Oil & Gas Production (up 2.6%) and Tobacco (down 0.9%).

VOLT INFORMATION SCIENCES INC [VOL] up 13.8% closing at $54.17 on 62% increase in net income, $0.86 per share compared to $0.54 per share for the fourth quarter last year. However, net sales were only up 3%. Rather high P/E ratio at 33 based on trailing 12 months.

STAGE STORES INC [SSI] jumped 11.5% closing at $33.05 following (1) updated guidance on 2007 earnings that projects a 20% increase over previous guidance, (2) approval of a $50 million Stock Repurchase Program, and (3) a 3-for-2 stock split to be paid as a stock dividend on January 31, 2007 to all holders of record of the company’s common stock at the close of business on January 18, 2007.

INCYTE CORP [INCY] up 11% closing at $7.06 following the announcement of positive clinical results from its HIV and Diabetes programs at the 25^th JPMorgan Healthcare Conference. This was followed by upgrades by UBS from “Neutral” to “Buy” and by Piper Jaffray from “Market Perform” to “Outperform.”

Long standing White Rabbit, CHEESECAKE FACTORY INC [CAKE] jumped 9.9% closing at $26.99 following an announcement that fourth quarter sales had come in at $360.4 million, representing an 18% increase over a comparable 13-week period in 2005. However, earnings continue to be veiled and there is very little visibility into recent operations given the tardiness of the reporting. Comparable restaurant sales were rather unimpressive, increasing only 0.8%.

ALNYLAM PHARMACEUTICALS [ALNY], a leading RNAi therapeutics company, jumped 8.9% closing at $22.22, following the announcement that it had obtained an exclusive worldwide license to a liposomal delivery formulation technology for the discovery, development and commercialization of RNAi therapeutics from a Canadian pharmaceuticals company, INEX PHARMACEUTICALS CORP [TSX: IEX]. RNAi or RNA Interference is a naturally occurring mechanism within cells for selectively silencing and regulating specific genes, and was recognized as a major break through with the award of the 2006 Nobel Prize for Physiology or Medicine. INEX PHARMACEUTICALS has obtained key patents for the development and commercialization of liposomal and/or lipid nanoparticle formulations that are required for systemic delivery of RNAi therapeutics.

APPLE COMPUTER INC [AAPL] soared 8.3% closing at an all time high of $92.57 on extraordinary volume of almost 120 million shares following the announcement of the revolutionary iPhone device due for release in the summer. While we are find the memory options somewhat disappointing, the carrier option (Cingular) disappointing and the price point on the high side, there is much that is compelling and little doubt that it will sell like hot cakes.

SPRINT NEXTEL CORP [S] dropped 11.2% closing at $17.45 on a huge volume of almost 150 million shares. The drop was probably due primarily to the announced decline of 306,000 post-paid subscribers, despite a slight improvement in the post-paid churn rate at 2.3% for the quarter (high compared to other wireless carriers). The planned headcount reduction of about 5,000 in the first quarter may finally reflect some post-merger synergies as the company transitions to a unified customer care, financial systems, device activation, and billing systems. Downgrades by CIBC World Markets, Deutsche Securities, Credit Suisse and HSBC Securities did not help. There is probably an interesting buying opportunity close to this level. The key is probably whether the iDEN network problems are finally solved. Hopefully, they will start to refine the bizarre content of some of the TV ad campaigns based on feedback.

MILLS CORP [MLS] slid 21.8% closing at $14.82 following the announcement that it had completed its investigation into its historical accounting policies and practices. As a result of the adjustments arising in part from the investigation, the company will be restating its financial statements for 2001-2004 and the first 3 quarters of 2005. The expected impact of the corrections is projected to be between $347 and $352 million. It is also noted that the company could be forced to seek protection under Chapter 11 if the company is unsuccessful in its efforts to pay-off the Senior Term Loan by March 31, 2007. See our earlier post:

“And all should cry, Beware! Beware!”

…

And close your eyes with holy dread,

For he on honey-dew hath fed,

And drunk the milk of Paradise.”

From Kubla Khan, by Samuel Taylor Coleridge.

ESCALA GROUP INC [ESCL] tumbled 41.3% closing at $4.54 on the announcement that the company would be delisted by Nasdaq for failure to file financial statements in a timely fashion. There are now about 22 other Nasdaq White Rabbits for which the gap between the last reported period and today is 284 days! (Look at our White Rabbit list for December and focus on the companies for which the Gap value matches that of ESCALA GROUP [ESCL] and the ticker symbol has 4 characters.)

By the way, yesterday’s comments on DYNAVAX TECHNOLOGIES CORP [DVAX] failed to make an important observation. While the failed test of TOLAMBA™ due to the absence of the disease certainly did not provide any evidence that the treatment was not effective, the wasted year of testing probably delayed the final commercialization of the product by that much and probably provided an opportunity for competitors to bring other treatments to market and gain market share – so of course some negative impact on the stock price should be expected. However, the 30% drop still seems a bit excessive for a non-test.

It was a mixed bag on Tuesday but no really strong moves on the part of any one sector. Overall, the average member of the SigmaInverse Universe was up 0.09% with 51.3% of the members posting positive returns for the day. The extremes were Mining, down 1.3% on average. and Restaurants, up 1.5% on average.

After about a month of dramatic slippage during December, it appears Biotech may be recovering, although the gains of the past few weeks have certainly been modest.

SEATTLE GENETICS INC [SGEN] soared up 24% closing at $6.56 following the announcement of an exclusive worldwide license agreement with GENENTECH [DNA] for the development and commercialization of SGN-40, a monoclonal antibody, for the treatment of multiple myeloma, chronic lymphocytic leukemia and non-Hodgkin’s lymphoma. The agreement calls for an upfront payment of $60 million and potential milestone payments exceeding $800 million. Royalty payments were described as “escalating double-digit royalties.”

IMMUNOMEDICS INC [IMMU] was up 16.9% closing at $4.23. This company is another biopharmaceutical company focused on the development of monoclonal antibody-based products for the treatment of cancer, autoimmune and other serious diseases. It appears that Monday’s move can be attributed to a combination of buyout rumors and the speculation regarding licensing deals similar to the one involving SEATTLE GENETICS.

AFFYMETRIX INC [AFFX] jumped 13.6% closing at $24.68 following the announcement that it was projecting fourth quarter revenue of about $100 million. Given the extremely high P/E ratio (196 on trailing 12 months earnings) and the fact that the projected fourth quarter revenues are below those of the same period last year makes us somewhat less than enthusiastic. However, the microarray area in general is hot and the company is expanding its production facilities in Sacramento so eventually there might be an opportunity here.

RADIOSHACK CORP [RSH] jumped 11.6% closing at $18.76, following its press release indicating that it expected fourth quarter net income to increase. However, the reaction here is rather odd, given there is no estimate of the profitability being given. The projection that comparable same store sales will decrease by approximately 7.8% implies stronger margins, but probably meager revenue growth. Given the high P/E ratio (63.6 on trailing 12 months earnings), we would be very cautious here.

DYNAVAX TECHNOLOGIES CORP [DVAX] dropped 30% closing at $5.96. Analysis of interim one-year data from its two-year ragweed allergy trial of its TOLAMBA™ treatment indicates no meaningful ragweed-specific disease was present in the study population! So of course there was no response relative to the placebo. A 30% drop in this case is rather absurd if in fact there the population did not support a measurable disease condition during the ragweed season. There is obviously the question as to what was behind the absence of the disease state in the test population – perhaps there is a new preventative treatment that will be discovered, but we would expect a follow-up study in a population actually suffering from a ragweed allergies.

The average gain in the SigmaInverse Universe on Monday was 0.1% with 50.1% of the members posting gains for the day and 46.7% posting a loss for the day. Significant sector moves for the day were Alternative Energy (up 1.2%), Automobiles (down 0.9%) and Construction (down 1.0%).

It’s probably just a coincidence, but the Airline sector on the busiest day of the year for airlines was the biggest gainer on Daily Sector Performance Chart (see below), thanks to some interesting news events involving regional carriers. Overall, of course trading was light in anticipation of the holiday. The average stock in the SI Universe of 3,521 lost 0.14% on Friday, with 35.6% posting positive returns for the day, 60.5% posting losses and 3.9% unchanged.

PINNACLE AIRLINES CORP [PNCL] took off on Friday, closing at $16.75 or a gain of over 56%, after announcing a new Airline Services Agreement, extending the partnership with NORTHWEST AIRLINES CORP [NWACQ] through 2017. NWACQ was down 8.6% closing at $4.04. PNCL was upgraded by Prudential, all the way from “Underweight” to “Overweight.” Part of the deal includes a $377.5 million claim in the bankruptcy proceedings of NORTHWEST AIRLINES so the exposure in that area appears to be largely covered. While the P/E ratio remains attractive, and the terms of the deal are likely to prove favorable over the next 11 years (especially the obligation of NW to provide jet fuel to PINNACLE at no charge, removing fuel as a revenue and expense item from PINNACLE’s statement of operations), we fail to see significant further upside potential unless the company takes advantage of new non-exclusive clauses in the new agreement.

Another interesting deal in the airline sector involved MESA AIR GROUP INC [MESA] up 2.7% closing at $7.92, after announcing that the company would be creating a Chinese regional airline in a joint venture with Shenzhen Airlines. The new airline is expected to launch operations within the year and to have 20 regional jets flying prior to the Beijing Olympic Games in 2008. Given the revenue growth that we are likely to see in this area and the rather attractive P/E ratio, this appears to be an interesting buy opportunity.

SCICLONE PHARMACEUTICALS INC [SCLN] jumped an impressive 38.5% closing at $3.13, on the news of Phase 2 clinical trial results in which a test group of patients with stage IV malignant melanoma, taking its new drug ZADAXIN® in combination with chemotherapy had a median survival period of 10.2 months, compared with 6.6 months for the control group treated with a combination of chemotherapy and interferon alpha.  Even more significant was the fact that the test group had more than double the tumor response compared with the control group.  On the basis of these results, we expect that the company will proceed with Phase 3 trials. Recalling the negative Phase 3 trial results last year for the combination of ZADAXIN and interferon alpha in the treatment of hepatitis C, this remains very speculative at this point. However, the balance sheet is reasonably healthy and the income statement showed a loss of only $0.03 per share in the third quarter. In addition, there is another proprietary drug, SCV-07, in the pipeline that has shown some efficacy in the treatment of multi-drug resistant tuberculosis and possibly other diseases. Given these considerations, it appears this remains a very speculative but intriguing buy opportunity.

Another drug stock with good news on Friday was INTERMUNE INC [ITMN] which shot up 29% closing at $28.40 on the news that a Japanese drug company SHIONOGI & CO LTD had reported positive results in a Phase 3 trial of a new drug pirfenidone in the treatment of idiopathic pulmonary fibrosis. INTERMUNE is also conducting Phase 3 trials for the same drug, although there is no guarantee that the results will also be positive since the dosage and length of treatment in the two studies are not the same. We see little remaining upside potential here because of the huge response in October to the ROCHE deal and the fact that profitability appears very far off at this point.

RED HAT INC [RHT] jumped 25% after announcing a very impressive third quarter result. Revenue for the quarter ended November 30^th, was up 45% over the same quarter last year. Net income for the quarter was $14.6 million or $0.07 per diluted share. Excluding stock compensation and special tax expenses, the profit was $0.14 per share, versus a consensus estimate of $0.12 per share. Also helping were upgrades by First Albany from “Neutral” to “Buy” and by Citigroup from “Sell” to “Hold.” It would appear that this move offsets the overreaction in October to the ORACLE announcements and indicates that ORCL and MSFT/Novell competitive moves are ultimately strengthening the Linux OS market. Despite the current P/E ratio (59.4 on trailing 12 months earnings) there is still some significant upside potential given the strong cash flow and growth possibilities through acquisition.

The markets turned south about mid-day on Thursday when the results of the Philadelphia Fed’s Manufacturing Survey were announced. The drop of 4.3% in manufacturing activity was the third negative reading in four months and the biggest drop in more than three years, and provided yet another sign that we are likely to see a correction as we enter 2007.

The average member of the SI Universe lost 0.20% on Thursday, with 36.8% of the members posting positive returns for the day. Unusual sector behavior was seen in Furniture & Fixtures (up 1.0%), Mining (down 1.4%), Pharmaceuticals (up .8%) and Travel (down 1.4%).

One of the leaders in the Furniture & Fixtures sector was HERMAN MILLER INC [MLHR] which was up 4.4% after posting strong results for the second fiscal quarter, ended December 2^nd. Sales for the quarter were $499.1 million, up 13.9% over the same period last year and orders were up an even more robust 22.1%. Net earnings were $36.6 million or $0.56 per share, which was an increase of 31.2% over last year, and in line with consensus estimates. The company provided guidance for third quarter (ending February 7^th) sales of $480 to $500 million, which was substantially above the consensus estimate of $459.47 million, and consistent with year over year growth in the range of 13% to 18%. With a forward P/E ratio of 15.9, strong current quarter corporate profits that are likely to result in significant capital expenditures for office furnishings and the very impressive increase in orders, we see considerable upside potential here, for at least one more quarter, although there are signs that double digit growth may not be sustainable through all of 2007.

PRAECIS PHARMACEUTICALS INC [PRCS] of Waltham, Mass., soared up 145% closing at $4.89 on the news that it was being bought out by GLAXOSMITHKLINE PLC for a cash purchase price of $5.00 per share or $54.8 million - the second acquisition by GLAXOSMITHKLINE PLC [GSK] this week. While we normally don’t track non-US companies, GSK is looking very attractive for some modest, but very stable upside potential.

SMITH & WESSON HOLDING CORP [SWHC] was shot down 15.8% closing at $11.60 after announcing results for the quarter ended October 31^st. The company reported sales of $50.8 million, up 42.9% over the same period last year, and net income of $2.9 million or $0.07 per diluted share, which was well below the consensus estimate of $0.09 per diluted share. It appears that the market was spooked by a sequential decline in the gross margin, without bothering to consider the possibility of seasonality or trends in the margin. It should also be noted that the number of shares outstanding increased about 5% and we would like some clarity on the line item “Other income/(expense)” which hit the bottom line pretty hard. However, when you actually look at the gross margin for the second fiscal quarter year-over-year, it improved from 29.3% last year to 31.2% this year!!! At this point there is actually no evidence of seasonality in the margins, but still, the second quarter margin was only slightly below the average of the previous 8 quarters (31.8%). Given the strong revenue growth, this is definitely the time to pull the trigger.

CREDENCE SYSTEMS CORP [CMOS] (Scientific & Tech Instr) up 25.6% closing at $4.96 after upgrades by Canaccord Adams from “Hold” to “Buy” and by Needham & Co also from “Hold” to “Buy.” Looks like the red ink is near an end and there is probably still some upside potential up to about $7. We would be somewhat cautious regarding the amount of long-term debt.

CATALINA MARKETING CORP [POS] surged 20.1% closing at $29.11 after filing an 8-K announcing it had engaged Goldman Sachs & Co. as a financial advisor, following receipt of an unsolicited private equity offer regarding acquisition of the company. At this point the particulars of the offer are unknown, so it is rather difficult to determine whether the surge presents an opportunity. Looking at the current P/E ratio of about 20, it appears the opportunity that was there is now gone.

MICROVISION INC [MVIS] (Electronics & Semi) took a macro step up 10.6%, closing at $3.02 as MDB Capital Group began coverage with a “Buy” rating.

EXPEDIA INC [EXPE] (Online) exploded up 9.9% closing at $20.46 following an announcement that the company intended to start a stock buyback program on Monday using a Dutch auction. Since the goal is to buy back approximately 10% of the 331 million shares outstanding, there is obviously no opportunity at this point.

ISIS PHARMACEUTICALS INC [ISIS] (Pharmaceutical) up 9.3% closing at $12.13 on volume more that 3 times average daily volume for the past 3 months. Apparently stock was hyped (Changewave Report) with no major news event. Some speculation that PFIZER might want to acquire ISIS given its recent clinical trial results. Given the very encouraging results for ISIS 301012, we are inclined to agree, but it’s beginning to get awfully pricy.

ARENA PHARMACEUTICALS INC [ARNA] jumped 7% closing at $14.14 with volume more than twice the average trading volume for the past 9 months as it announced the pricing of its public offering of 11,500,000 shares at $13.21. Would say this is a speculative but attractive buying opportunity given the product pipeline and liquidity.

MADDEN STEVEN LTD [SHOO] tumbled 7.7% closing at $36.34 following a downgrade by First Albany from “Buy” to “Underperform.” The analyst pointed to the steep discounting for the product line at major distributors. Does look like some disappointing numbers lie ahead. Don’t see much of an opportunity here.

CUBIST PHARMACEUTICALS INC [CBST] (Pharmaceutical) also tumbled 7.9% closing at $18.82, following a downgrade by Piper Jaffray from “Outperform” to “Market Perform.” Can’t find any compelling reason for the downgrade so this appears to be a speculative but attractive buying opportunity.

One of the infamous SI white rabbits (defined as late SEC filers) DORAL FINANCIAL CORP [DRL] dropped 10.5% closing at $3.00 apparently due to concerns of long-term viability now that it has straightened out its accounting. Lack of transparency here continues to be a concern.

Daily Sector Performance Chart

Back in the black – but not by much! The average return in the SI universe on Friday was 0.06% with only 48.5% of the universe posting a positive return for the day. 47.3% posted negative returns and 4.2% were unchanged. Big sector moves were posted by Online (up 1%) and Construction (down 1.2%).

KEYSTONE AUTOMOTIVE INDUSTRIES INC [KEYS] was down a stunning 21.2% closing at $30.55 on the news the International Trade Commission had ruled in favor of FORD regarding 7 of 10 design patents dealing with parts of the Ford F-150 truck. Given the almost inconsequential impact of this decision on the KEYSTONE revenues (0.1% for sales on a trailing 12-month basis according to a Reuters story), we are inclined to view this as a definite buying opportunity for KEYS. Also, the ruling will be contested, although we have no estimate for the probability of a reversal at this point. Would suggest a conservative value between 0 and 0.5.

PARLUX FRAGRANCES INC [PARL] was hammered down 14.6% closing at $5.77 on the announcement that it would be selling back the Perry Ellis fragrance brand to Perry Ellis for approximately $63 million, which is well below the $140 million for which PARLUX had agreed to sell the brand to Victory International last summer. Looks like PARLUX has very little control over its brands if this is any indication. Hopefully they can put the $63 million to good use in acquiring some new brands. Given recent performance, we are not optimistic and it appears new leadership is needed.

CREE INC [CREE] tumbled 12.9% closing at $18.39 after revising downward its projections for the second fiscal quarter ending December 24^th. The company now projects sales of just $90 to $92 million for the quarter, well below the consensus estimate of $107.2 million and well below last year’s sales of $105.6 million for the same period. Yuck! Given declining sales, we do not see an opportunity at this time.

REDBACK NETWORKS INC [RBAK] jumped 11.7% closing at $16.94 after announcing that it had won the second phase of a broadband network upgrade by Guangdong Telecom – the largest provincial carrier in China. The carrier will use REDBACK’s SmartEdge® family of multi-service edge routers to deliver broadband internet, IPTV and VPN services for up to 4 million homes and businesses. With more than 50 million broadband customers, China is REDBACK’s second largest market outside the U.S. and it currently has edge routers deployed in 22 of the 32 provinces in China. Despite the high P/E ratio (89.6) and projected revenue growth of just 23% next year, we suspect the actual growth could be a lot stronger because of the international markets and this is still an interesting opportunity.

ON SEMICONDUCTOR CORP [ONNN] was up 10.6% closing at $7.52 following a very strong presentation at the Lehman Brothers Technology conference in San Francisco on Thursday. Given the relatively low P/E ratio (12.4) but only 5% expected growth next year, we do not see a lot of upside potential at this time and the continued selling by TPG is likely to continue to keep downward pressure on the stock.

MOVIE GALLERY INC [MOVI] up once again – this time 10.3% - to close at $4.49. Probably a good time to sell since we see no justification for the 47% increase in price since Monday!

IMMUNOMEDICS INC [IMMU] ramped up 10% closing at $3.09 following the announcement that the company had been awarded a patent for various methods of treating B-Cell lymphomas, leukemias and autoimmune diseases using the company’s monoclonal antibody that binds to a certain antigen present on B-lymphocytes. We need some evidence of execution here. A patent award by itself does not necessarily bring in revenue. Can the company successfully license its patents? The jury is out.

MEDAREX INC [MEDX] shot up 7.5% closing at $15.46 after announcing that the FDA had designated as a Fast Track product the company’s new drug ipilimumab used in combination with chemotherapy in previously untreated metastatic melanoma patients, or by itself in previously treated metastatic melanoma patients.

AKAMAI TECHNOLOGIES INC [AKAM] up 7.4% closing at $53.38 with a trading volume more than double that of the average daily volume for the past 3 months. No real news and the P/E is 143.5 and the consensus estimate is for next year’s revenue growth to be about 34%, which I think is on the aggressive side, so this appears to be considerably over-valued at this point.

Daily Sector Performance Chart

With lots of nervousness on the jobs front, the markets were off with some substantial drops in all ranges of market capitalization. The average stock in the SI Universe posted a loss of 0.33% on Thursday.  Only 32.3% of the members posted a positive return for the day.  Unusual sector moves were Alternative Energy (down 1.7%), Construction (down 1.5%), and Tobacco (up 1.2%).

Wednesday, December 6, 2006:

DIRECTED ELECTRONICS INC [DEIX] (Electronics & Semi) dropped 14.3% closing at $11.28 after lowering guidance fro the 2006 to reflect lower than anticipated sales of satellite radio receivers. Sales for 2006 are not projected to be in the range of $430 to $440 million, compared to earlier guidance of between $440 and $460 million, corresponding to a reduction in growth from about 48% to 43%. Not much of a drop in growth, BUT with a P/E ratio of 389 (good grief!), we do not recommend running out to buy this quite yet.

One of our perennial white rabbits (defined as companies tardy in filing SEC quarterly statements) SIRVA INC [SIR] (Transportation) dropped 11.8% closing at $3.28, after reducing its guidance for 2006 earnings BEFORE interest expense, taxes, depreciation and amortization to between $45 and $55 million, compared to previous guidance of $65 to $80 million. Given the company’s sensitivity to the slowing U.S. real estate market and growing inventory costs within its Global Relocation business, the writing on the wall is pretty grim for SIR. It’s almost two years now since the last 10-Q! Beware.

BLYTH INC [BTH] dropped 11.5% closing at $22.05 after issuing a press release (but not filing an 8-K – Tsk! Tsk!) lowering its outlook for fiscal 2007. For fiscal 2007, the company projects a loss in the range of $2.50 to $2.60 per share. Excluding special items, earnings should be in the range of $1.20 to $1.25 per share. The company apparently plans to continue aggressively paying off the long term debt and eventually the bottom line will benefit from the discontinued operations in Europe, but the biggest upside potential here in the near-term is probably a private equity buyout, given the strong cash flow from operations.

SONICWALL INC [SNWL] (Network Tech) dropped 10.9% closing at $8.81 with an analyst warning from WR Hambrecht based on channel surveys that indicate a soft quarter. Given some less than pleasant experience with the hardware (VERY small sample of ONE!) and a sense that the company really doesn’t position itself well at all for the SOHO environment price-wise, we are inclined not to see any opportunity here.

Another white rabbit, NOVELL INC [NOVL] (Software) dropped 5.4% closing at $5.99 after preliminary announcements of Q4 results in which the fading Netware related sales continue to dangle like an albatross around the rapidly growing Linux platform. Not sure the company is really capable of reinventing itself once again.

ORACLE CORP [ORCL] (Software) dropped 5.2% closing at $17.88 following a warning from an analyst at Lehman suggesting that the company’s fourth quarter sales would likely fall short of expectations. Given the strength of competitive offerings and an appalling lack of innovation, combined with a dizzying pace of acquisition that must be posing significant cultural adjustment problems, it is very likely that investors are in for a rude surprise at some point in the next two quarters. This is not a buying opportunity in our estimation.

MONSTER WORLDWIDE INC [MNST] up 7.5% closing at $45.79 with strong technicals as the price moved above its 200 day moving average and the big staffing companies took some hammering. This looks interesting although the monstrous P/E ratio makes me just want to observe from a distance.

LEADIS TECHNOLOGY INC [LDIS] (Electronics & Semi) up 8.3% closing at $4.71 with no particular news other than a lot of speculation about apparent institutional buying. Relatively low price, but they need to get cash flow positive again soon.

MOVIE GALLERY INC [MOVI] up once again 16% closing at $4.07 apparently on speculation that the company might be close to announcing some relief on the debt front. Since the resolution in our opinion is likely to result in significant dilution and the long-term business prospects for a company that is likely to be hit hard by video-on-demand this is beginning to look a time for extreme caution.

INSPIRE PHARMACEUTICALS [ISPH] (Pharmaceuticals) up an inspiring 16.8% closing at $6.18 with a trading volume that was ten times the average daily trading volume for the past 3 months! Large block trades suggest institutional buying. No immediate upside opportunity, but definitely appears to have a strong balance sheet.

VERSANT CORP [VSNT] (Software) soared 20.3% to close at $14.74 after announcing strong results for the fourth quarter. The company reported revenues from continuing operations or $4.6 million for the quarter, compared to $3.8 million for the same period last year, an increase of approximately 21%. Net income for the quarter was $0.38 per share compared to $0.14 per share for the same period last year. With a P/E ratio of about 15 this company is probably a very strong acquisition target and seems to represent a very strong buy opportunity.

DOCUCORP INTERNATIONAL INC [DOCC] (Software) jumped 30.1% closing at $9.76 announcing it had agreed to a buyout by privately held Skywire Software for about $127 million or $10 per share.

Daily Sector Performance Chart

The average stock in the SI Universe posted a loss of just 0.02%, however the losers significantly outnumbered the winners with only 43.5% of the 3,543 members posting a positive return for the day. The big sector moves were Alternative Energy (down 2.2%), Construction (up 1.3%) and Railroads (down 1.6%).