wall street nuggets

Shades of Bausch & Lomb? ADVANCED MEDICAL OPTICS INC [EYE] retreated 8.9% closing at $35.75 as it recalled certain lots of its contact lens solution originating at a production facility in China and lowered its financial outlook. It seems to have learned some important lessons from the earlier experience of BAUSCH & LOMB [BOL] in getting in front of the story with full disclosure. However, it didn’t take Credit Suisse to react, downgrading the stock from “Outperform” to “Neutral.” With revised guidance on 2006 earnings in the range of $1.30 to $1.40 per share, implying a P/E ratio of about 26.5, and an estimated year-over-year revenue growth of about 8%, we still see more downside risk at this time.

MEDTRONIC INC [MDT] surged 9.4% closing at $53.55 by beating expectations in its quarterly results and being upgraded by JP Morgan from “Neutral” to “Overweight.”

Daily Sector Performance Chart

Markets were again generally on the positive side with the average gain for the day being 0.23%. The big outlier today was Mining which was up 2.2%.

Monday, October 30, 2006.

EMISPHERE TECHNOLOGIES [EMIS] dropped 23.8% closing at $6.77 after releasing what appeared to be rather promising results from its 90-day Phase 2 study of its oral insulin product for the treatment of Type 2 Diabetes Mellitus. Essentially, the study concluded that the treatment was effective at the 10 mg, four times a day, dosage level without the need to frequently monitor blood glucose levels or to titrate the dose for any reason. At two lower dosage levels (5 mg 4 times a day, and 10 mg 2 times a day) the response was not statistically significantly different from the placebo response. No adverse reactions were noted at any dosage level. On balance, we would have to conclude that the test results should have been received positively and assuming that oral delivery of insulin has a huge advantage over the needle delivery, it seems possible that the poorly worded press releases might have led some casual readers to conclude that the efficacy of the treatment was being called into question. If so, this should be a great opportunity to buy.

TENET HEALTHCARE CORP [THC] tumbled 10.6% closing at $7.42 following an announcement that it expects to report on November 7^th a net loss in the range of $82 to $92 million (or $0.17 to $0.20 per share) for the quarter ended September 30^th. The consensus estimate had been for a loss of $0.01 per share. THC was the weakest member of the Healthcare sector which was down 0.4% for the day.

ALPHA NATURAL RESOURCES INC [ANR] slipped 8% closing at $15.42 on Monday with all kinds of bad news. Not only were oil prices down sharply, but the company points to lower productivity in some of its deep coal mines and rising costs, as it cut its estimate for 2006 earnings from $1.50 to 1.91 per share, to a new range of $0.90 to $1.14 per share. The consensus estimate had been for $1.63 per share.

NUANCE COMMUNICATIONS INC [NUAN] raced ahead 7.8% closing at $10.91 in the heels of PR on the Amazing Race, pitting the human world champion of text messaging against new Mobile Dictation voice recognition technology from NUANCE COMMUNICATIONS. Taking only 16.32 seconds, the software blew away the human record of 42.22 seconds.

STEMCELLS INC [STEM] rose 7.9% closing at $3.15 possibly on a recommendation by Market-Pulse.com. No other events of note.

IOMEGA CORP [IOM] hit a 52-week high moving up 11.9% to close at $4.03 with no news of note other than a continued favorable response to last weeks announcement of quarterly results.

AMERICAN POWER CONVERSION [APCC] surged ahead 26.4% closing at $30.02 on the news that it had agreed to an acquisition by the French company, SCHNEIDER ELECTRIC for $6.1 billion or $31 per share. The deal is expected to close in the first quarter of 2007, pending approval of APPC shareholders and regulatory approval. No need for battery backup here.

TRUSTREET PROPERTIES INC [TSY], a REIT specializing in fast-food restaurant property, was up a sharp 35.7% closing at $16.97 after announcing that it had agreed to an acquistion by GE Capital Solutions valued at $3 billion including debt. Each share of TSY is being valued at approximately $17.05, for a total of $1.15 billion cash.

The Daily Sector Performance Chart

The average gain for Monday in the SI Universe was 0.35% with 59.1% of the members posting positive returns for the day. The big losers for the day were Mining (down 1.8% on average) and Oil & Gas Production (down 1.1% on average).

APPLE COMPUTER INC [AAPL] should do well on Thursday after reporting awesome third quarter results. Spectacular sales of both iPod music and players and the new Macs led to earnings of $0.62 per share compared with earnings of $0.50 in the same period last year. Increasing market share of the Macs coupled with higher margins than it enjoys on the iPods combined to improve gross margins overall and produce a stellar result. The company estimates that over 70% of the 2007 year car models will offer iPod integration as an option. The new operating system, Leopard, should ship in the spring – Can’t wait. The only worm in the apple might be the fallout from the pending investigation into the handling of stock based compensation in earlier financial results. Despite risk, still looks like a buy.

ILLUMINA INC [ILMN] sparkled up 19.5% closing at $43.78 after reporting explosive growth for the third quarter. The company reported that, due to rapidly increasing demand for genotyping products, third quarter revenue was up 174% over the third quarter of 2005. The company also raised guidance for the fourth quarter, projecting revenue growth of 135% year-over-year and non-GAAP net income of $0.31 per diluted share. Total revenue for fiscal 2006 is now projected to be between $178 and $182 million, compared to the current consensus estimate of $168.2 million. P/E ratio of 345 is very high, but I expect to see more rapid growth here.

HEALTHWAYS INC [HWAY] was up a healthy 13.5% closing at $44.63 after reporting fiscal fourth quarter results that exceeded expectations and provided strong guidance for 2007.

PIPER JAFFRAY COMPANIES [PJC] rose 12% closing at $69.62 after reporting net income from continuing operations of $9.5 million, or $0.50 per diluted share, for the quarter ended September 30^th. The consensus estimate had been for net income of $0.45 per share. Given the decline in net income from $10.9 million last year and the decline in net revenues of 3% year-over-year, I see no justification for the 12% increase.

AVANIR PHARMACEUTICALS [AVNR] advanced 9.8% closing at $8.77 after announcing the results of a very small study (only 36 patients) involving its drug candidate Neurodex that the FDA should be deciding on before October 30^th. While apparently the results were statistically significant, the sample size seems rather small.

Posting earnings of $0.06 per share compared to a loss of $0.93 per share for the same period last year, American Airlines parent, AMR CORP [AMR] soared 7.5% closing at $25.90. Although expectations had been for earnings of $0.42 per share, the Q3 result included a $99 million charge for fuel-hedging contracts. Without the charge, earnings would have come in at $0.45 per share. The stock of course also benefited from the big drop in oil prices on Wednesday.

LINEAR TECHNOLOGY CORP [LLTC] dropped 7.1% closing at $30.58 after announcing fiscal first quarter ended October 1^st results that were in line with expectations, but issued a warning that for the fiscal second quarter, “visibility is low and customers are guarded in their forecasting and inventory management.” Given historical seasonality the company projects second quarter sales and profits to be down about 5% to 7% over the first quarter.

NOVELLUS SYSTEMS INC [NVLS] dropped 7.4% closing at $26.45 after reporting disappointing results for the third quarter ended September 30^th. The company reported net sales of $444 million up 8.3% from the same period last year. Net income for the quarter was reported to be $70 million or $0.57 per diluted share, compared to a net income of $23.4 million for the same period last year. The consensus estimate for earnings had been $0.51 per share so the company easily clear that hurdle. The consensus revenue estimate had been for $444.03 million, so the Q3 result was right on target. The reason for the drop must be attributed either to the company’s fourth quarter guidance projecting revenues in the range of $415 to $430 million, substantially below the consensus estimate of $444.89 million or a downgrade by Global Crown Capital from “Overweight” to “Neutral.” The company also indicated that it expected fourth quarter bookings to be “flat to down 10%,” with “some softening” in the semiconductor manufacturing industry. Earnings guidance for the fourth quarter was in the range of $0.49 to $0.53 per share, which is in line with current expectations of $0.50 per share.

ENDO PHARMACEUTICALS HOLDINGS INC [ENDP] slipped 13.3% closing at $29.41 following a press release after the market close on Tuesday, indicating that it had learned that the Division of Bioequivalence, Office of Generic Drugs (OGD) had issued bioequivalence recommendations regarding ENDO’s Lidoderm® (lidocaine topical patch 5%), that essentially are less rigorous than the demonstration of bioequivalence through a comparative clinical efficacy study, and could potentially lead to generic alternatives before Lidoderm’s patents expire in 2015. ENDO claims it will defend its patents against any challenges. The stock was downgraded by Citigroup from “Hold” to “Sell” and by Leerink Swann from “Outperform” to “Market Perform.” Given that 61% of ENDO’s revenues for the first six months of 2006 came from Lidoderm, there is very significant exposure here, and we expect there could be equivalent generic treatments in the wings, although it is difficult to estimate the exact risk level. Wednesday’s drop seems in the ballpark.

COGNEX CORP [CGNX] tumbled 14.9% closing at $22.72 after the company reported third quarter results that essentially met expectations with regard to earnings and revenue projections. Third quarter revenue was $58,005,000, down slightly from last year’s third quarter of $58,256,000, and in line with the consensus estimate of $58.01 million, although apparently falling short of the company’s internal expectations as described by Dr. Shillman, Cognex’s Chairman and CEO who described Q3 revenues as being “below our expectations.” Perhaps more ominous was the Q4 guidance which called for “modest revenue growth, if any.” The stock was downgraded by Bear Stearns from “Outperform” to “Peer Perform,” by Needham & Co. from “Buy” to “Hold,” and by Canaccord Adams from “Buy” to “Hold.” Our sense is that the decline was excessive, probably based on a misread of the revenue expectation quote. The company’s expectations of lower capital investments in the semiconductor, electronics, automotive and steel industries through the end of 2006 are consistent with other projections and suggest little upside in the near term, but the fundamentals are good and, at the current ratio of price to earnings, it looks like a long term buy.

APOLLO GROUP INC [APOL] plummeted 22.9% closing at $37.55 after the company reported fiscal fourth quarter financials on Tuesday. The company reported earnings for the quarter ended August 31^st of $93.5 million compared with net income of $106.2 million for the same period last year. Analysts’ consensus estimate had been for net earnings of about $115.2 million. Credit Suisse downgraded the stock from “Outperform” to “Neutral.” Caution here is important until the company completes its review of practices related to stock option grants and quantifies the impact of “various deficiencies” it has found on previous filings. It is appalling that we have a 232 day gap since last day covered in a 10-Q or 10-K filed with the SEC. In Wednesday’s press release, the Associates program enrollments at the end of August were up 80% year-over-year, but the Bachelors program enrollments were down about 9%. We expect that the attrition is higher in the Associates program and that the targeting this segment may have led to the lower margins.

The average loss for the day was hardly observable at -0.08%. The market overall was very neutral with 48.3% of the members of the SI Universe posting positive returns, 48.3% posting negative returns, and 3.4% unchanged. Big losers were Alternative Energy (down 1.6% on average), Electronics & Semiconductors (down 1.7% on average) and Education (down 2.4% - due in large part to impact of APOLLO and small sample of 14).

As a wise man once said, “He who lives by the crystal ball learns to eat broken glass.” Some significant bumps in the road like the producer price index number and an INTEL downgrade ahead of its earnings announcement, set the tone early and, despite some recovery toward the end of the day, the celebration will have to wait awhile before we cross the elusive 12,000 threshold. However, it was a piece of cake to predict that the U.S. projected population would cross the 300,000,000 mark today!

SAPIENT CORP [SAPE] dropped dramatically 13.1% closing at $5.06 on the news that its CEO and founder, Jerry Greenberg, would be resigning in the wake of an investigation into stock-option grants. It was also announced that the interim CFO had resigned as well. Wisdom says be cautious here.

HOME SOLUTIONS OF AMERICA INC [HSOA] tumbled 12.1% closing at $5.58 following the filing of an 8-K announcing its acquisition of FIRELINE RESTORATION INC. The balance sheet for FIRELINE looks pretty grim, with very high Accounts Receivable, very weak quick ratio, and declining revenues (first 6 months of 2006 vs first 6 months of 2005). Apparently cash flow negative because of receivables problem(s). Can’t solve this problem easily …

A O SMITH CORP [AOS] slipped 11.3% closing at $38.91 following the announcement of financial results for the third quarter. The company reported earnings of $0.55 per share on sales of $564 million, compared with earnings of $0.32 per share for the same period last year. Since the consensus estimate had been for earnings of $0.52 per share on sales of $560.9 million, the results were actually better than expected. However, the company indicated that residential sales of water heaters were higher than normal as consumers purchased ahead of a September price increase implemented to offset higher raw material and freight costs. As a result of this and the slowdown in housing construction, the company expects a slowing of sales for the balance of the year. We assume most people don’t focus on the remaining life expectancy of their water heater or put that together with a pending price increase to drain the sales pipeline. However, the impact of fewer housing starts is real and should be reflected in conservative earnings expectations for the remainder of the year. The decline in earnings in the Electrical Products business is of more concern. While revenues were up slightly (5%), this reflects the acquisition of Yueyang Zhongmin in the fourth quarter of 2005, and without the acquisition, sales in the U.S. were down. The company will be consolidating its motor fabrication plants to reflect the decreased demand and improve earnings. Generally, this company seems to be executing well, expanding in China and somewhat cushioned from housing cycles because of the relatively short lifespan of the average water heater. As a result, it seems today’s drop was excessive and is providing a good buy opportunity.

CALLAWAY GOLF CO [ELY] bogeyed badly dropping 10.6% to close at $12.61. Actually it looks more like a total miss. The company announced a preliminary third quarter loss per share of $0.17 to $0.19 on sales in the range of $193 to $195 million. Excluding special charges for equity-based compensation, restructuring and Top-Flite integration, the loss per diluted share is expected to be in the range of $0.12 to $0.14, which is still well short of the consensus estimate of a profit of $0.08 per share. With a P/E of 40, we don’t sense a great opportunity here. The stock was downgraded by Barrington Research from “Outperform” to “Market Perform.”

JEFFERIES GROUP INC [JEF] dropped 7.7% closing at $29.24 following the announcement of third quarter results that were quite respectable. Net Revenues were up 14% to $341 million and net earnings were up 19% to $0.32 per share. Earnings were in line with analysts’ estimates (consensus was also $0.32 per share), but revenues were below the consensus estimate of $348.4 million. Given the regular quarterly dividend ($0.125 per share) declared today, this could be a good buy opportunity.

TRIAD HOSPITALS INC [TRI] tumbled 7.5% closing at $38.85 after warning that third quarter earnings would not meet expectations because of unpaid medical bills. TRI was downgraded by BMO Capital Markets from “Outperform” to “Market Perform.”

JUPITERMEDIA CORP [JUPM] jumped 12.4% closing at $9.67 with no big news. Looks at first blush like buyers looking for low P/E’s, but with 3.4 times normal volume, it’s probably something else.

PARLUX FRAGRANCES INC [PARL] was up a sweet 12.8% closing at $7.16. But all of the action came in the last 15 minutes of trading. We assume this involves speculation regarding the 13D filing on behalf of Glenn H. Nussdorf, who “has begun to explore the possibility of making an acquisition proposal.”

CBOT HOLDINGS INC [BOT] traded up 13% closing at $151.99 on the news that it was being bought by its arch-rival, the CHICAGO MERCANTILE EXCHANGE HOLDINGS INC [CME] for $8 billion. The transaction is expected to close in mid-2007 and values the CBOT shares at $151.27, and today’s close reflects reasonable confidence that the deal will be approved by the Department of Justice. CME was up 2.6% closing at $516.50, reflecting the market’s perception that there is great synergy here. Given the improved economies of scale, we see this as a very significant buy opportunity for CME.

LEAR CORP [LEA] leaped 15.3% closing at $28.34 on the news that Carl Icahn had signed an agreement to buy a $200 million equity stake in LEAR. The company, which makes auto seats, interiors and automotive electronic components, hit a six month high on the news. Given the amount of long term debt and some skepticism as to whether Icahn can be a catalyst for the change needed here, with so much dependency on domestic manufacturers, we are fail to see this as an opportunity at this time.

ICOS CORP [ICOS] popped up 16.2% closing at $31.50 on the news that it was being acquired by its Cialis partner, ELI LILLY [LLY] for an estimated $2.1 billion or $32 per share. Currently Cialis has an estimated 25% of the ED market.

PEMSTAR INC [PMTR] was up 19.2% closing at $4.35 after announcing that it had signed a definitive merger agreement with BENCHMARK ELECTRONICS [BHE]. Each share of PEMSTAR will be converted into the right to receive 0.16 of a common share of BHE, which values PMTR at $4.63 per share based on the closing price of BHE on October 16^th.

BROADWING CORP [BWNG] soared 19.7% closing at $15.90 following the announcement of that it had signed a definitive agreement to be acquired by LEVEL 3 COMMUNICATIONS INC [LVLT]. According to the terms of the deal, shareholders of BROADWING will receive a combination of cash and stock, worth approximately $15.31 per share. LEVEL 3 COMMUNICATIONS INC [LVLT] in contrast to the usual punishment dealt the acquirer, actually jumped 13.2% closing at $6.02 on an extraordinary volume of almost 165 million shares.

INTERMUNE INC [ITMN], a biotech company specializing in therapies for pulmonology and hepatology, soared 25.5% closing at $21.12 after announcing an exclusive partnership with the Swiss pharmaceutical giant ROCHE HOLDING AG to develop and commercialize hepatitis C treatments based on its line of protease inhibitors. The deal involves an upfront payment of $60 million and up to $470 million in milestone payments. Probably won’t have much of an impact on ROCHE.

The averge loss for the day was -0.49% with only 32.2% of the SI Universe posting positive returns for the day. The big losers today were the Construction Sector (down 1.8% on average) and Mining (also down 1.8%).

DISCOVERY LABORATORIES INC [DSCO] climbed an impressive 23.9% closing at $2.64 on a volume that was almost 13 times the average daily volume over the past 90 days. This was in response to a press release indicating a very positive Phase 2 Clinical trial results for its new Surfaxin® for the prevention and treatment of Bronchopulmonary Dysplasia (BPD), a lung disease typically affecting premature infants.

DELUXE CORP [DLX] jumped up 16.9% closing at $21.29, pretty much recovering from the big hit taken at the end of June, when it canceled a project to automate some of its operations and took a pretax charge of $45 million. The company announced before the markets opened on Thursday that it now expected earnings for the quarter ended September 30^th to be in the range of $0.59 to $0.61 per diluted share, compared to its previous guidance of $0.41 to $0.45 per share, due primarily to lower manufacturing costs and lower SG&A expenses. That undoubtedly generated the pop.

TUESDAY MORNING CORP [TUES] rose a remarkable 12% closing at $16.33, with a press release announcing comparable store sales decreased 4.6% for the third quarter, and expected earnings for the third quarter in the range of $0.07 to $0.08 per diluted share. Given the rather low P/E ratio and healthy dividend, this one does look like a reasonably safe investment, although we don’t see much evidence of growth, with only a 1.1% increase in net sales over the same period last year.

BE AEROSPACE INC [BEAV] rocketed up 10.4% closing at $23.75 on no apparent news. Price movements here are somewhat suspicious. BE CAERfull.

SIGMATEL INC [SGTL] was up 9.3% closing at $5.51 with an upgrade by Am Tech/JSA Research from “Sell” to “Neutral.”

YUM BRANDS INC [YUM] was up a tasty 8.3% closing at $59.08 after reporting very positive third quarter results, including strong double-digit operating growth from China (26%) and a 7% reduction in shares outstanding for the quarter. The company raised its earnings outlook from $2.83 per share to $2.89 per share, which represents 14% growth before special items.

There was a huge focus on COSTCO WHOLESALE CORP [COST] which rose 7.6% closing at $53.90 with over 18 million shares traded. The company reported a very healthy 19% increase in net sales for the 17-week fourth fiscal quarter ended September 3^rd, although it should be noted that the comparable period in 2005 only had 16 weeks and therefore the actual increase in net sales was probably closer to 12%. Net income for the 17-week period was $0.75 per diluted share ($355.6 million), compared with $0.73 per diluted share during the 16-week fourth quarter last year. The consensus estimate for earnings for the quarter had been $0.73 per share.

SIRF TECHNOLOGY HOLDINGS INC [SIRF] rode the waves higher 7.3% closing at $21.68. The P/E ratio seems a bit out of whack. Probably a good idea to wait until the third quarter conference call scheduled for October 19, 2006 at 4:30 PM Eastern time.

CB RICHARD ELLIS GROUP [CBG] surged 7.3% closing at $25.99 on the news that it would be added to the S&P 500 index, replacing BellSouth, which is being acquired by AT&T.

FIVE STAR QUALITY CARE INC [FVE], an operator of senior living communities, was down 7.3% closing at $10.34, after announcing that it intended to offer $80 million of Convertible Senior Notes due 2026. Proceeds from the offering will be used for general business purposes, including possible future acquisitions. It is our opinion that the next 10-Q is critical in evaluating whether the termination of the management contracts with SLS have improved the margins as expected. While the demographics argue that the company is well positioned, the rental fees and management challenges in the near term could be a problem.

INTERNAP NETWORK SERVICES CORP [INAP] dropped 9.6% closing at $15.41 on the news that it was buying VITALSTREAM HOLDINGS INC [VSTH] for $217 million. VITALSTREAM provides products and services for storing and delivering streaming digital media over the Internet and would compete against AKAMAI. According to one analyst quoted by Reuters, the “acquisition will be dilutive from an earnings per share perspective probably for a couple of quarters.” While the exchange ratio of 0.5132 implies VSTH shares are being valued an unusually high premium of 36.7% based on Wednesday’s closing prices, which probably explains the unusually large drop for INAP, it does appear that the savings INAP will realize by switching from AKAMAI to VITALSTREAM fully justifies the acquisition.

SYSTEMAX INC [SYX] tumbled another 21.5% closing at $11.80 for a combined two day loss of 37%. Yesterday’s press release at 3:55 pm, apparently did not allow enough time for the full public reaction to the announced delay in the 10-Q filing. Those who sold yesterday morning should perhaps be congratulated for their extraordinary good luck. :-)

It reminded us of the “Perfect Storm.” Except in this case everything came together to send the market higher. The latest Beige Book struck the perfect balance between slowing growth and inflation. Quarterly earnings from COSTCO were encouraging (although probably not read closely enough). Oil prices were up only slightly, with the November futures contract for light, sweet crude oil settling at $57.86 per barrel, up only $0.39 for the day. Despite the pathetically small sample and lack of consistency in what it really represents, the Dow Jones Industrial Average continues to have an amazing psychological impact on the markets that is hard to discount. When it gets into new territory, the herds are likely to stampede on the slightest provocation.

The average gain for the day in the SI Universe of 3,567 stocks was 1.69%, with 83.7% of the members posting positive returns for the day. Rather remarkably, all sectors showed very respectable gains. So forget about using sector rotation to explain some of the gains.

GOOGLE INC [GOOG] continued to defy gravity, advancing $8.50 per share on Monday, in anticipation of the announcement after the bell that the company would be acquiring YouTube for $1.65 billion. The price continued upward in after hours trading following the actual formal announcement. In most cases, I would pull the plug at this point and be thankful for the ride, but when the increase in market cap in a single day more than pays for the acquisition, it appears the end is not quite in sight. Of course, however smart this acquisition appears on the surface, actual market dynamics will eventually prevail and a new equilibrium will be established. In the meantime, ride it out, no matter how insane.

POWERWAVE TECHNOLOGIES INC [PWAV] dropped 17.7% closing at $6.42 after lowering guidance for the third quarter ended October 1^st. The company now projects revenues will be in the range of $155 to $160 million, compared with earlier guidance in the range of $200 to $210 million. This is getting to be a disturbing recurring pattern. On April 5^th the company revised guidance downward, blaming seasonality and a loss of sales to Cingular. At the beginning of August, the company announced second quarter revenues of $232.4 million, compared with earlier guidance of $240 to $260 million. While the third quarter revisions are blamed on difficulties in implementing a new ERP system in Europe and delays in the transfer of production from one facility to another, all of which sounds like one-time hits that should be resolved by the fourth quarter, there is a pattern of missed targets here that cannot be ignored, and I am reluctant to assume the company has really turned the corner. Rather than making assertions about believing that the company is “well positioned” with its products and customers and confident in its “ability to overcome this setback,” we need to hear some specifics regarding what is going to change.

MATRIA HEALTHCARE INC [MATR] dropped 11.2% closing at $25.58 on rumors that it had lost a contract to UNH. At this point, it appears there is no confirmation or denial of the rumors, so it appears the price is being manipulated and we urge caution.

NEW RIVER PHARMACEUTICALS INC [NRPH] skyrocketed 61.5% on Monday closing at $42.32 after the company announced it had received an approvable letter from the U.S. FDA for NRP 104, a new drug for the treatment of pediatric Attention-Deficit/Hyperactivity Disorder (ADHD). No additional studies have been requested by the FDA as a condition for approval, clearing the path for the drug to reach the market much faster than many had expected. SHIRE PLC [SHPGY] (ADR traded on NASDAQ) which has worldwide marketing rights for the drug, also jumped 15.7% on the news. It is expected that NRP 104 will eventually replace SHIRE’s Adderall XR.

AMKOR TECHNOLOGY INC [AMKR] soared 33.9% closing at $6.76 following a press release on Friday in which it finally reported restatements of financial results for 2003 through 2005 and the first two quarters of 2006. Its internal investigations did not identify any manipulation of stock option pricing by any member of Amkor’s existing management team, although one former executive may have manipulated stock options and two other former executives may have been aware of the manipulation. The company also noted in Friday’s press release that the 10-Q for the quarter ended June 30^th “cures the alleged default under the indentures governing each of the Company’s outstanding series of notes,” for which it had solicited on October 4^th waivers of compliance with certain covenants that apparently are no longer relevant.

MERCANTILE BANKSHARES CORP [MRBK] jumped 22.2% closing at $44.94 on the news that it had agreed to be acquired by PNC FINANCIAL SERVICES for $47.24 per share, in a deal valued roughly at $6 billion in cash and stock. The deal is still subject to regulatory and shareholder approval.

NETRATINGS INC [NTRT] surged 16.1% closing at $16.91 after receiving a proposal from VNU GROUP B.V. to acquire the outstanding publicly held interest in NTRT for $16.00 per share.

The Alternative Energy sector was up significantly with the North Korean nuclear test once again reminding everyone of the need for energy independence. Leading the Alternative Energy sector was PACIFIC ETHANOL INC [PEIX] which jumped 10.3% closing at $13.87, also reflecting the announcement that it had completed its first ethanol production facility in Madera, California. Production will begin on October 17^th and should reach maximum capacity (35 million gallons per year) by mid November. A second plant in Boardman, Oregon, is on schedule for completion by the end of the second quarter of 2007.

The average gain in the SI Universe on Monday was 0.56% with 63.8% of the 3,567 stocks in the group posting positive returns for the day. The most impressive gain was turned in by the Alternative Energy group, which was up 3.1% 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.