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Aether Sys Up 29%; Stock Hit 52-Week Low Tuesday
DOW JONES NEWSWIRES
By Amy Braunschweiger
Of DOW JONES NEWSWIRES
NEW YORK -- Takeover rumors sent shares of Aether Systems Inc. (AETH ) up as much as 39%, just two days after the shares hit a 52-week low in anticipation of its first-quarter earnings release.
Investing Web site Briefing.com said trading floor rumors alleged that International Business Machines Corp. (IBM) would buy wireless and mobile data company Aether for $9.50 a share - a huge premium to Wednesday's closing price of $3.42 a share. Talk about the alleged buyout could also be read on Yahoo! Inc.'s (YHOO) financial Web site.
"I think it's definitely up because of the rumor," said Wedbush Morgan Securities analyst Scott Sutherland about the stock. However, the price of $9.50 a share is way too steep to pay for Aether because of its debt load, he added.
Neither a representative from Aether, nor IBM, were immediately available for comment.
Aether's shares recently traded at $4.49, up $1.07, or 30.1%, on volume of 8.7 million shares - sharply higher than average daily volume of 610,918 shares.
On Tuesday, the company's shares hit a year-low of $3.05 each only hours before Aether, of Owings Mills, Md., released its quarterly figures. The company reported a first-quarter loss of $1.32 a share compared with a year-earlier loss of $29.67 a share. Both figures included items.
According to Wedbush's Sutherland, Aether's expenses are too high to justify an acquisition price of $9.50 a share.
Aether has $11.37 a share in cash - but net of its debt, the company only has $4.81 a share in cash, he said.
"No one would buy it for more than $5 a share," Sutherland added.
Adding to the confusion surrounding Aether's stock was a ratings change mishap by Merrill Lynch & Co. earlier Thursday.
Merrill cut its rating on the company's stock to sell from neutral, but the headline attached to the research note said Merrill upgraded the shares, potentially confusing some investors.
Merrill corrected the false headline, sent out around 11:30 a.m. EDT, within one minute.
Merrill analyst Tal Liani advised investors to sell Aether's stock because of "dismal" revenue growth and a depleting cash position. Additionally, Liani believes that the company's additional expense cuts would greatly reduce needed spending on research and development.
"We see very limited upside potential in Aether's businesses," Liani said in a note Thursday.
Other analysts disagree.
John Bensche, an analyst with Lehman Brothers Inc., sees no risk of a cash burnout.
Aether is using cash at a rate of about 40 cents a share each quarter, Bensche said. At that rate, the company could exist for 25 quarters without any improvement in its business.
"I just don't see much downside form the levels yesterday, given that there's a pile of cash there to provide a floor of value," Bensche told Dow Jones Newswires.
Bensche has a price target of $3 on the stock, and rates it at market perform.
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