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%).

Friday December 15, 2006:

IMMUNICON CORP [IMMC] jumped 30.2% closing at $3.45 following the announcement that VERIDEX LLC, a JOHNSON & JOHNSON [JNJ] company, had received FDA clearance for the CellSearch™ Circulating Tumor Cell Kit from IMMUNICON for the monitoring of breast cancer.

W R GRACE & CO [GRA] surged up 9.3% closing at $20.35 following a bankruptcy court ruling, denying a motion for a summary judgment related to the asbestos claims associated with the company’s Zonolite attic-insulation product. Apparently the court decided that asbestos in the product did not pose “an unreasonable risk of harm.” So, given what we know about the carcinogenic properties of asbestos, we should logically assume this implies the product must pose a reasonable risk of harm!

QUIKSILVER INC [ZQK], which designs, produces and distributes a broad range of outdoor sports apparel brands, shot up 8.3% closing at $15.77 after announcing operating results for the fourth quarter ended October 31^st. The company reported net revenues of $778.4 million for the quarter, up 22% over the same period last year. Net income for the quarter was $65.3 million, up 94% over the same period last year. The stock was downgraded by Wedbush Morgan from “Buy” to “Hold.” Given expectations for a mild winter, and hence weakness for the Rossignol brand, and some weaker growth going forward, with a relatively high P/E ratio (32.7 based on trailing 12 months), we do not see a great deal of upside potential at the moment.

TEKTRONIX INC [TEK] (Scientific & Tech Instr) dropped 9.3% to close at $27.63 after announcing results for the second fiscal quarter ended November 25^th. The company reported net earnings from continuing operations of $19.6 million or $0.24 per share for the quarter, compared with earnings of $0.24 per share last year as well, which was well below the consensus estimate of $0.37 per share. The company reported net sales of $272.8 million, which matched the consensus estimate, up 7.7% from the same period last year. The stock was also downgraded by Robert W. Baird from “Outperform” to “Neutral.”

PRA INTERNATIONAL [PRAI], which provides product development services for pharmaceutical and biotech companies worldwide, plummeted 9.5% closing at $25.63 following the announcement of the resignation of Patrick K. Donnelly as Director, President and CEO. While the departure at this time appears cordial, the reason given – “to embrace new challenges and opportunities” – certainly raises more questions than it answers. The stock was downgraded by Robert W. Baird from “Neutral” to “Underperform,” and by Goldman Sachs from “Buy” to “Neutral.”

BLACK & DECKER CORP [BDK] was hammered down 10% to close at $78.26 following a press release in which it lowered earnings guidance for the fourth quarter and the full year. Earnings are now expected to be in the range of $1.30 to $1.35 per share for the fourth quarter and approximately $6.50 per share for the full year. The consensus estimate for fourth quarter earnings had been $1.86 per share. The company also projects a decline in sales of approximately 8% for the quarter, primarily attributed to the housing decline in the U.S. It would appear that the short-term outlook is still somewhat grim, but that the company is fundamentally very strong and generating strong positive cash flow. A good buying opportunity should materialize in a 3 to 6 month timeframe.

Daily Sector Performance Chart

The week ended on weak note with the average member of the SI Universe posting a loss of 0.11% and only 43.9% of the members posting a positive return for the day. The big sector moves on Friday were Mining (down 1.4%) and Railroads (down 1.1%).

It appears that increasing uncertainty regarding fourth quarter consumer spending and prospects for resolving sectarian violence in Iraq are leading to some erosion of confidence in the markets.  All 42 SI sectors posted significant losses for the day.  The losses were also consistent across all ranges of market capitalization, although the losses for the large caps were considerably less than the mid, small and micro caps.

DISTRIBUTED ENERGY SYSTEMS CORP [DESC] up 7.3% closing at $3.81 on no specific news, but considerable speculation regarding a short squeeze and chart patterns being favorable. Volume was about 3 times the daily average. Given the low price, and likely volatility here, negative cash flow from operations, and unimpressive balance sheet, we definitely do not see an opportunity based on value at this point in time.

J CREW GROUP INC [JCG] dropped 7.1%, giving back a little on last week’s big gains, to close at $40.21 following a downgrade by CIBC World Markets from “Sector Outperform” to “Sector Perform.” With the drop, the price seems less inflated, and has more potential for long-term growth, but no big short-term opportunity.

SIGMA DESIGNS INC [SIGM] dropped 7.7% closing at $22.07, with lots of high expectations for tomorrow’s financial results. Unfortunately, given the extremely high P/E ratio, we do not see a big opportunity here.

POLYONE CORP [POL] slipped 8% to close at $7.84 following a downgrade by KeyBanc Capital Markets / McDonald from “Hold” to “Underweight.” With the upcoming restatements of financial results for 2003 through the present, we draw no conclusions, although based on earnings reports through the first half of the year, the stock would appear undervalued.

BENCHMARK ELECTRONICS INC [BHE] down 8.3% closing at $24.40 after reporting financial results for the quarter ended September 30^th. Net income was $29.3 million or $0.45 per diluted share, compared to $0.32 per diluted share for the same period last year. Sales of $770 million for the quarter were up 37% over the same period last year. This appears to be a very strong buying opportunity for BHE, given the very low P/E, and very strong growth, with a very healthy balance sheet.

LUMINEX CORP [LMNX] lost some luster, dropping 11.9% to close at $12.12 after announcing financial results for the third quarter ended September 30^th. The company reported net income of $111,000 or $0.00 per share, compared with a net loss of $0.02 per share for the same period last year. Revenue for the quarter was $12.5 million, a 16% increase over the same period last year, but below the consensus estimate of $13.7 million.

NYSE GROUP INC [NYX] was down 6.6% closing at $101.11 as it took a bit of a breather from its mad climb from $56.35 on August 23^rd to its current price, just as it was announced that a U.S. regulator had cleared the way for its acquisition of the Euronext stock exchange. The biggest hurdle involves a group of European regulators who will are expected to decide within the next few weeks.

 Daily Sector Performance Chart

The average loss in the SI Universe was (-2.05%) across 3,547 stocks, with only 9.2% posting positive returns for the day.  The sectors taking the hardest hits were Airlines (down 3.8%), Network Technology (down 3.7%) and Brokers (down 3.6%).

The announcement that the GDP grew only 1.6% in the third quarter (versus 2.1% expected) brought the bears out of hibernation. Also, a Goldman Sachs report claiming motherboard demand was falling off a cliff hit the computer and semiconductor sectors pretty hard. This double whammy on Friday, definitely cooled off the markets. On balance, as the third quarter results roll in, they appear to be encouraging for the most part, and while I personally expect a rather harsh landing in the first half of 2007, most corporate balance sheets should be able to weather the storm. We may not appreciate the bump in the year ahead, but I do believe that the correction will be very much appreciated about 5 years from now.

VERTEX PHARMACEUTICALS INC [VRTX] vaulted up 17.6% closing at $40.66 when it announced some very encouraging results in the treatment of hepatitis C. VERTEX’s investigational hepatitis C virus (HCV) protease inhibitor in combination with pegylated interferon was reported to have reduced HCV RNA below detectable levels in 24 of 26 patients treated in early-stage clinical trials.

VISICU INC [EICU] rose on cue 16.4% closing at $8.75 following a strong third quarter. The company reported revenue of $8.2 million, up 68% over the same quarter last year. The company also reported a swing to profitability, with a GAAP operating income of $2.0 million, compared to an operating loss of $35,000 for the same period last year. Net income for the quarter was $0.07 per diluted share, versus a consensus estimate $0.04 per diluted share.

NETGEAR INC [NTGR] LANded up 16.2% closing at $27.48 following a great quarter. Earnings of $0.37 per share easily topped the consensus estimate of $0.32 per share and third quarter net revenue of $151.6 million beat the consensus estimate of $140.4 million. The company projects fourth quarter net revenue to be in the range of $153 to $160 million, compared to the current estimate of $148.27 million. With 22% quarterly growth (year-over-year) and a forward P/E of 19.4, this still looks like a buying opportunity. I’m probably somewhat influenced also by actual bad experiences with some competitive products.

XM SATELLITE RADIO HOLDINGS INC [XMSR] up a sparking 13% closing at $11.94 on a variety of rumors and speculation and a possible short squeeze. Fundamentals here are still not compelling from my perspective.

DECKERS OUTDOOR CORP [DECK] stepped up 9% closing at $53.87 with strong Q3 results and an upgrade by Cowen & Co. from “Neutral” to “Outperform.” Third quarter earnings of $0.83 per share easily topped the consensus estimate of $0.54 per share. UGG sales continued to outpace expectations. Simple and Teva brands are also showing solid growth. Believe the Piper Jaffray downgrade has not been digested yet, so some downside is likely on Monday. Some downward pressure already in after-hours trading.

INTERSIL CORP [ISIL] slipped 9.6% to close at $22.87, on news of the departure of President and COO, Lou DiNardo, who had just taken on the role of COO in January of 2006. While the public verbiage was polite and gracious, it provided little insight into the reason(s) behind the departure. More transparency is needed before considering this an opportunity in either direction.

SILICON IMAGE INC [SIMG] was battered down 17.1% to close at $11.77 after announcing earnings for the third quarter of $0.09 per diluted share on record revenue of $78.3 million, up 39.9% from the third quarter of 2005 and up 11% sequentially. The consensus estimate for earnings had been $0.21 per diluted share. If we add the stock-based compensation back into earnings but still exclude the other special charges, earnings would have come in at $0.19 per diluted share – still $0.02 below expectations, but not enough in our opinion to justify a 17.1% drop. The company also provided fourth quarter guidance that indicated revenue would decrease approximately 3% to 5% sequentially, due to normal seasonality for semiconductor sales. The company is now projecting that revenue growth for fiscal 2006 should come in at 32% to 34%, which is consistent with earlier guidance of 30% to 35%. Given the current P/E ratio of 32.6, this looks like an excellent buying opportunity.

NEXTEST SYSTEMS CORP [NEXT] tumbled 17.1% closing at $10.78 after announcing fiscal first quarter results that were not bad but providing guidance that failed to justify a high multiple. For the quarter ended September 23^rd, revenue was $26.859 million, up 3% sequentially and up 56% from the same period last year. Earnings for the quarter were $0.25 per diluted share versus a consensus estimate of $0.20 per diluted share. The major cause for concern would be new orders of $15.2 million, which the company interprets as being indicative of a slowing in the business environment. While the company should be able to ride through the slowdown, the dependence on relatively few customers is another cause for concern. About 29% of fiscal 2006 revenues came from a single customer (SANDISK). The new Magnum iCP test system for automated testing of CMOS image sensor devices was introduced earlier in the week and should extend the product line into a hot area, so that it is not so dependent on testing just flash memory. The stock was downgraded on Friday by Needham & Co. from “Buy” to “Hold.” Given the high multiple and customer concentration, this remains very speculative.

GEORGIA GULF CORP [GGC] plunged 18.5% to close at $21.93, hitting a 52-week low, after reporting disappointing earnings for the third quarter. Net sales for the quarter were $576.3 million, compared to $525.2 million for the third quarter of 2005, but well below the consensus estimate of $612.25 million. Earnings for the third quarter were $0.66 per diluted share, down from $0.82 per diluted share in Q3 2005, and once again well below the consensus estimate of $1.06 per share. Earnings shortfalls were attributed to higher raw materials costs and a loss of $0.08 per share attributed to a foreign exchange hedge related to the Royal Group acquisition, which was completed October 3^rd and therefore not yet a major factor in the financial results, except for the FX hedge. The stock was downgraded by BB&T Capital Markets from “Hold” to “Underweight” and by Citigroup from “Hold” to “Sell.”

The Daily Sector Performance Chart

With the wet blankets regarding GDP and motherboards, there was pretty much a 180 degree turnabout from yesterday. The average loss for the day was -0.89% with only 22.7% of the members of the SI Universe posting positive returns for the day. The big loser was Construction (down 1.9% on average). While not much to write home about, Mining was an outlier in the positive direction (up 0.3% on average).

CHATTEM INC [CHTT] jumped 28.4% on Friday closing at $44.20, following the announcement that it had agreed to acquire the U.S. rights to five leading consumer and over-the-counter brands from Johnson & Johnson and the consumer healthcare business of Pfizer Inc. The divestiture of the five brands is a regulatory requirement resulting from the upcoming acquisition of Pfizer Consumer Healthcare by Johnson & Johnson [JNJ]. The five brands are ACT (anti-cavity mouthwash), UNISOM (sleep aid), CORTIZONE (hydrocortisone allergy product), KAOPECTATE (anti-diarrhea product), and BALMEX (diaper rash product). Apparently the 5 brands are perceived to be very complementary to the existing CHATTEM product line and are expected to be accretive to earnings in fiscal 2007.

MOBILITY ELECTRONICS [MOBE] imploded dramatically on Friday, dropping 41.8% to close at $3.13 per share, after revising its guidance for the third quarter downward, projecting revenues of $24.1 to $24.3 million, versus a consensus estimate of $26.86 million expected by analysts. A total of $3.2 million in lost revenue was attributed to lower than expected sales to the pharmaceutical field trials industry and reductions in inventory by a significant customer (Targus). Given the new revenue projection for Q3, revenue growth for the third quarter would be about 4.7%, which is down significantly from the 28% growth seen in the second quarter. The company also indicated that its fourth quarter revenue would be adversely impacted by the lowering of inventories by Targus. More importantly, the company indicated that 2007 results would be adversely impacted by the loss of contracts with Dell and Energizer Holdings Inc. Looking at the degree of exposure to the top 3 customers for the first 6 months of 2006 as reported in the latest 10-Q, which is very extreme at 56%, and assuming a worst case scenario that the top two are Dell and Energizer, it would appear that 41% of 2007 revenues have been lost. New management is in place and the company has some interesting technology in the pipeline, but until it starts to close some new deals and reduce its dependence on so few customers, this would be an extremely risky stock.

MICRON TECHNOLOGY INC [MU] dropped 13.7% closing at $15.14 with the announcement of financial results for the fourth quarter ended August 31^st. The company reported earnings of $0.08 per diluted share on net sales of $1.4 billion, falling somewhat short of the consensus estimate of $0.14 per diluted share. We think this now represents a rather attractive investment point on the long side, assuming the P/E ratio of 27 is probably about as low as it is likely to go, and the diversification into other areas like CMOS image sensors is likely to provide some interesting growth going forward. The purchase of flash memory maker Lexar complements the dynamic RAM products and the current quarter’s results reflect some costs associated with the acquisition, but no revenues yet.

WEBMETHODS INC [WEBM ] tumbled 10.8% closing at $6.67 with its preliminary announcement of financial results for the quarter ended September 30^th. The company now expects to report revenues of $48.5 to $50.0 million, versus a consensus estimate of $54.5 million by analysts. The new estimate reflects virtually no revenue growth over the same period last year. The company also expects to report a loss of $0.06 to $0.08 per share for the quarter, which is well below the consensus estimate of a loss of a profit of $0.03 per share.

SOVEREIGN BANCORP INC [SOV] surged 11.6% closing at $24.10 amid speculation regarding the likelihood of an ouster of SOVEREIGN’s CEO at a Board meeting on Tuesday, and GRUPO SANTANDER’s [STD] takeover of SOVERIGN. SANTANDER’s stake in SOVEREIGN now stands at 25% and it has the option of a complete takeover in 2008 and 2009. SOVEREIGN’s share price has been bouncing around between $20 and $22 for the past 3 years, despite some acquisitions and expansion into the New York City market.

CALGON CARBON CORP [CCC] was up 9.1% closing at $5.05 following an announcement that it had received notification from the Department of Commerce (DOC) that the DOC would be imposing anti-dumping duties ranging from 14% to 228% on all imports of steam activated carbon from China. CALGON is a leading U.S. manufacturer of steam activated carbon used in air and water purifiers. This led to an upgrade of CCC stock by Brean Murray from “Hold” to “Buy.”

GLOBAL SIGNAL INC [GSL] jumped 7.7% closing at $53.94 with the news that it was being acquired by CROWN CASTLE INTERNATIONAL CORP [CCI] in a deal valued at $5.8 billion, including debt. [CCI] dropped 4.7% closing at $33.10 on the same news. Current GSL shareholders will receive a combination of CCI stock and cash with a cap on the cash of $550 million. Those electing cash will receive $55.95 per share, while those receiving CCI shares will receive 1.61 shares of CCI for each share of GSL. The almost immediate adjustment in the price of GSL to the deal amount reflects the fact that the 3 largest GSL shareholders, representing approximately 40% of GSL’s shares outstanding, have already agreed to vote in favor of the acquisition.

The average loss for the day across the 3,568 stocks in the SI Universe was -.28%, with only 35% posting positive returns for the day.  Alternative Energy (down 2.51% on average) was the big loser, while Mining (up 1.3% on average) and Tobacco (up 1.02% on average) were the big gainers.  Generally, the markets took a breather from the mid-week excitement.

YAHOO INC [YHOO] tumbled 11.2% closing at $25.75 after issuing a 3^rd quarter warning at the Goldman Sachs Communacopia Conference that it was seeing advertising weakness “in some of the most economically sensitive categories.” As a result, YAHOO is now projecting results in the lower half of the ranges previously provided on July 18^th. The bad news probably generated some pin action with other stocks as well. GOOGLE [GOOG] was down 2.6% closing at $403.81. With the current YHOO price at a level last seen on July 20^th, we feel compelled to once again say it looks like a good price to buy in at, but the upside potential is no longer likely to come from a third quarter earnings surprise but rather from what we expect to be a strong performance by tech stocks in general. Click here for our previous post.

INTERNAP NETWORK SERVICES [INAP] has moved from the Amex [IIN] to the Nasdaq exchange. The stock was also upgraded by Cowen & Co. from “Neutral” to “Outperform.” The company was profitable in the most recently reported quarter and is about to significantly upgrade routers (10x) for high performance delivery of content on the Internet. Small, but very impressive list of customers should make this reasonably attractive.

OMNOVA SOLUTIONS INC [OMN] fell a dramatic 14.2% closing at $4.76 after announcing third quarter earnings of $0.08 per diluted share compared with $0.03 per diluted share for the same period last year. However, the consensus estimate had been for earnings of $0.12 per share, so the punishment was quick and severe. On the bright side, net income was up 136% to $3.3 million with improved margins. Net sales were pretty flat due to softness in Performance Chemicals (net sales off 7.8% in the 3^rd quarter) attributed partially to the decline in new residential construction, which we expect to continue. Net sales of Decorative Products was up 12.2% for the 3^rd quarter over year ago levels. There is a commitment to some new products, which should drive some growth, but until the products are out there, this one calls for some patience.

MONSTER WORLDWIDE INC [MNST] slipped down 7.1% closing at $37.10 on the news that the Board of Directors had suspended its senior vice president and general counsel, Myron Olesnyckyj, pending the results of its ongoing review of the Company’s stock option grant practices, and that there may be a need to restate its financial results for 2005 and prior years. The company further stated that it does not expect a material impact on 2006 earnings. While the news was not released until after the close of trade on Tuesday, it appears to have leaked earlier in the day, since the big drop occurred between 9:30 and 10:00 am EDT.

SIRIUS SATELLITE RADIO INC [SIRI] fell 6.1% closing at $3.86 on rumors that Howard Stern was returning to regular radio. Apparently the rumors were false.

NAPSTER INC [NAPS] popped up 13% closing at $4.01 on the announcement that it had retained UBS Investment Bank to explore a number of options including the sale of the company. Given the lack of growth in the paid subscriber base and the likelihood that the advertising-supported free music sites are encountering the same softness reported by YAHOO, the prospects of a sale are not very good.

HOME SOLUTIONS OF AMERICA INC [HSOA] was up 9.7% closing at $5.89 with no apparent news. Possible short squeeze.

There was great news on the inflation front with core PPI (excluding energy and food down 0.4%). While we don’t sense any jitters in the market regarding what the Fed might announce following tomorrow’s FOMC meeting, it is inevitable that inertia should have dominated the markets. However, within certain segments there were definitely significant moves.

As expected, there was once again more of a decline in housing starts. As those who have been following our posts on this topic are undoubtedly aware, the bottom is still likely to be far below where we are now. However, the P/E ratios in the Construction sector already signal the bottom that lies ahead, so we do not expect too much of a reaction. Although, the Construction sector was down an average of 1.07% today, it could have been a lot worse in other regimes.

Oil prices were down sharply ($2.15 per barrel in the futures market), with the usual dramatic impact on Airlines (up 2.11% on average) and Alternative Energy (down 3.02% on average).

BALLY TOTAL FITNESS HOLDING CORP [BFT] appeared totally out of shape sinking 17.5% to close at $2.22 after reporting a second-quarter net loss from continuing operations of $0.7 million ($0.02 per share) and a decline in net revenues of 2% from the same period last year to $254.6 million, driven by a 3% decline in the average number of members over the past year. The company also advised that as of August 31^st, borrowings had increased to $48.5 million and letters of credit in the amount of $14.1 million. At current burn rates, and without an agreement to extend the maturity of the Credit Agreement, the company will default on Credit Agreement obligations next April.

HYPERCOM CORP [HYC] mysteriously down 10.7% closing at $7.23, despite the press release regarding the sale to IRN Payment Systems. Possible arbitrage opportunity with PAY and HYC.

STRATAGENE CORP [STGN] soared 28.1% closing at $5.52 with the publication of press release highlighting the FDA’s publication of results from its MicroArray Quality Control (MAQC) project. The project’s goal was to develop standards and quality measures for the microarray community so that these devices could be used reliably in clinical practice and regulatory environments. Microarrays are basically glass chips about 1.5 cm square containing thousands of known gene sequences called probes. When a patient’s genetic material mixed with a fluorescent dye is placed on the chip, it will bind with complementary probe sequences and show up when the dye is scanned with a laser beam. Other public companies involved with microarrays are AFFYMETRIX INC [AFFX], AGILENT TECHNOLOGIES [A], GE HEALTHCARE unit of GENERAL ELECTRIC [GE], and ILLUMINA INC [ILMN].

HAYES LEMMERZ INTERNATIONAL INC [HAYZ] up again 21.1% defying gravity to close at $2.99. The slide show that was attached to the 8-K on Monday was slick, but I still think the wheels are about to come off on the next turn.

W R GRACE & CO [GRA] up 15.4% closing at $12.62 with no specific news of note. There may be some sense that the litigation downside may not be as bad as originally expected on the asbestos front, but we don’t see any real cause for celebration yet.

Sunnyvale based OPSWARE INC [OPSW], which provides server software, shot up 15% closing at $8.27 with a press release pointing out that a recent IDC Report identified OPSWARE as the “fastest growing provider of server provisioning software.” The server provisioning software market is based on the “deployment, configuration, and management of server system and application software.”

PSYCHIATRIC SOLUTIONS INC [PSYS] spiked up 11.5% closing at $35.98 on the news that it would be replacing RSA SECURITY INC (being acquired by EMC) in the S&P MidCap 400.

CONTINENTAL AIRLINES INC [CAL] took off with a strong gain of 10.3% closing at $28.16 as the impact of the drop in crude oil prices finally hit the airlines. Other beneficiaries included: US AIRWAYS GROUP INC [LCC] up 10.2% closing at $44.60 and AMR CORP [AMR] up 9.7% closing at $22.20.

BEST BUY CO INC [BBY] was up 9.1% closing at $52.14 after reporting 22% year over year growth in second quarter earnings - $0.47 per share versus a consensus estimate of $0.44 per share.

The Daily Sector Performance Chart was very strong in almost all sectors.