Motorola rockets on Icahn news; Calpine drifts off on profit taking; Lexicon lifted; Triad up after close

By Ronda Fears

Memphis, Jan. 30 - Motorola Inc. surged Tuesday on news that noted investor and activist stockholder Carl Icahn was going to seek a seat on its board, which signaled further restructuring speculation within the electronics giant.

In another move on an activist stockholder agenda, Triad Hospitals Inc. saw a spike in after-hours trading. But otherwise, traders said Tuesday that sentiment in names where news has been lacking or visibility is murky turned to taking profits as month-end approaches.

"As the first month of the year draws to a close, we are seeing a bit more selling in the spread markets, but it seems to be coming from profit taking. There is still plenty of buy interest, albeit at lower levels, and customers seem ready to wait for the market to come to them, rather than step up," one distressed stock trader said.

He specifically cited selling in bankrupt independent power producer Calpine Corp. this week as the anticipated news that contributed to a run-up last week failed to materialize. Players had been speculating that there would be news, or some indication, about the company's backers for the San Jose, Calif.-based company's reorganization plan.

"The Fed meets today and tomorrow, and most expect no change. Calpine is weaker as some take big profits from the recent run-up," the trader said. "This is healthy for the market, and I would actually like to see more selling, but something tells me this is going to be very limited."

Calpine shares (Pink Sheets: CPNLQ) lost 5 cents, or 3.31%, to $1.46, indeed amid light volume of 7.8 million shares versus the norm of 8.55 million shares.

In other bankrupt stocks, amid a barrage of counterclaims on whether Northwest Airlines Corp. is seeking a merger and whether Delta Air Lines Inc. should succumb to the hostile pursuit from US Airways Group Inc., those stocks were mixed. Delta shares (Pink Sheets: DALRQ) were in a holding pattern, unchanged at $1.16; Northwest shares (Pink Sheets: NWACQ) extended previous session losses with a decline of 19 cents, or 5.25%, to $3.43.

The ebullience in the telecom and technology sectors on the Motorola spike did not transfer to Primus Telecommunications Group Inc., however, another deeply distressed stock. A distressed stock trader said Primus shares sank Tuesday on market chatter that the McLean, Va., long distance provider's bondholders were suing the company. The shares (OTCBB: PRTL) dropped 2 cents, or 3.23%, to 60 cents on heavy volume of 652,458 shares versus the norm of 372,007 shares.

Triad higher after hours

After losing more ground in the regular session, Triad Hospitals saw a surge after the close on news that New York-based hedge fund TPG-Axon Capital Management LP has boosted its stake in the Plano, Texas, hospital to 8.87%, which traders expect will lead it to apply more pressure to the company to improve performance and boost the stock value.

In recent sessions, Triad shares have sunk on frustration from the lack of a deal after at least six months of looking, according to traders, with the selling trend compounded by fears of more restrictive Medicare and insurance reimbursements for hospitals under President Bush's new health care reform package.

Triad shares (NYSE: TRI) closed Tuesday off by 23 cents, or 0.54%, at $42.73; in after-hours activity the stock was higher by 62 cents, or 1.45% at $43.35.

TPG-Axon made a filing at the Securities and Exchange Commission after the close, declaring the higher equity stake in Triad. The 8.87% position is up from 7.4% in December and 6.2% in November.

For six months or longer, TPG-Axon has been pressuring Triad to make some changes, one trader said, but now they are "really getting some muscle behind them" with the increased stock ownership position.

The $5.8 billion hedge fund, managed by former Goldman Sachs star trader Dinakar Singh, told the company that it expects to nominate a slate of five board directors for election at its 2007 annual shareholders' meeting.

TPG-Axon has been critical of Triad for its underperformance compared with other hospitals.

Motorola could double: sources

The big activist stockholder story of the day, however, was in regard to Motorola. The stock rocketed up by nearly 7% after Icahn said he would seek a seat on the No. 2 global cell phone maker's board, which was widely perceived as the first step in a further restructuring of the company.

One trader said he thinks Motorola could nearly double from where it is at because of "the value Icahn could unlock here, based on the sum of the parts." An analyst also pegs the sum of Motorola's parts putting the stock worth roughly double versus where it is currently trading.

Motorola recently posted disappointing fourth-quarter results and said it would cut 3,500 jobs, or 5% of its work force. It already has an aggressive $4.5 billion stock buyback program in place as well, but the market is anticipating that Icahn will push for Motorola to step that up since it has roughly $12 billion in cash and an estimated net cash position of $7 billion.

So, further restructuring may entail a recapitalization or a breakup, said Kaufman Bros. analyst Raimundo Archibold in a note to investors. He calculates the sum of the parts of Motorola value at $35 to $40 per share and also suggests that the company has the flexibility to lever its balance sheet; based on a 2x net debt to EBITDA multiple, to buy back up to $14 billion of its equity, or 30% of its market cap.

Motorola shares (NYSE: MOT) on Tuesday advanced $1.27, or 6.94%, to $19.58.

The stock had been hit two weeks ago when Motorola warned about fourth-quarter and 2006 results.

Nonetheless, Archibold reiterated a buy rating on Motorola shares with a target of $23, based on an expectation of gradually improving margins in its mobile devices business and continuing positive trends in its other two businesses - networks and enterprise, and connected home.

Motorola said Tuesday it had received notification from Icahn that he intended to be nominated for one of 12 seats on the company's board at its next annual shareholders meeting, which has not yet been scheduled. Icahn owns 1.4% of Motorola stock, the company said.

Some analysts, however, were steering clients away from Motorola to rival Nokia Corp., the No. 1 global cell phone maker, and Nokia shares (NYSE: NOK) advanced 46 cents, or 2.15%, to $21.86 in the regular session. But a small sell in the after-hours market at $21.24 could portend more profit taking on the coming session, one trader said. He noted that only 200 shares traded in Nokia after the close.

Headset makers head higher

The Motorola news intensified lots of players' focus on the technology sector, and by one trader's view smaller headset makers and digital voice developers were making players' buying screens, including Logitech International SA, Koninklijke Philips Electronics NV and Creative Technology Ltd.

Logitech shares (Nasdaq: LOGI) gained 33 cents on the day, or 1.2%, to $27.85.

Philips shares (NYSE: PHG) rose 52 cents, or 1.35%, to $39.

Creative Tech shares (Nasdaq: CREAF) added 4 cents, or 0.59%, $6.85.

"These are bargains as we see it," the trader said.

He said Freemont, Calif.-based Logitech is his favorite, having shown "consistent double-digit growth," and has a number of new products. In addition to headsets for mobile phones and a number of other electronic gadgets, the company makes the screens for iPods and universal remote controls.

Lexicon lurches on trial news

Several biotech names were on the move Tuesday in the wake of speculation that pharmaceutical giants Bristol-Myers Squibb Co. and Sanofi-Aventis SA were in talks about a merger. One of the bigger moves higher in the biotech space was Lexicon Genetics Inc. with an 8.5% gain after the company advanced its Alzheimer's drug, LX6171, into a phase 1b clinical trial and said it has undertaken a major restructuring.

Lexicon has strategic collaborations and alliances with Bristol-Myers for the discovery, development and commercialization of novel small molecule drugs in the neuroscience field.

Lexicon shares (Nasdaq: LEXG) rose 30 cents on the day, or 8.5%, to $3.83.

In addition to the trial news Tuesday, traders said Lexicon buyers were impressed by its restructuring news Monday that includes a major shift in its operational focus, a name change and steep layoffs.

"The news on the tape was good," said a stock trader.

"The stock is very cheap for all they have in the pipeline. I'm surprised it hasn't happened before. We've liked this one for a while."

Julia Gregory, Lexicon's chief financial officer, said that the company completed a layoff of 133 employees on Monday, mostly at its facility in The Woodlands, Texas, reducing its workforce to 592.

Moreover, the layoffs reflect a transformation from a biotech focused on genetic research to one involved in clinical drug development. Hence, Lexicon is reducing its budget in genetic research efforts to reallocate resources to novel drug development programs. The company adopted a so-called "10-10" program to place another 10 drug candidates into human clinical trials by 2010.

Further along those lines, the company plans to change its name to Lexicon Pharmaceuticals Inc.

RBC Capital analyst Jason Kantor upgraded Lexicon shares to outperform from sector-perform, citing a belief that one or two partnering deals for one of its clinical or preclinical programs is likely soon.

In addition to an alliance with Bristol-Myers, Lexicon has collaborations with Genentech, Inc. and privately held Organon USA Inc. and Takeda Pharmaceutical Co. Ltd.

While there was still no official announcement of a linkup between Sanofi and Bristol-Myers speculated on Monday, several analysts Tuesday said the rumored deal would make sense and both stocks extended moves from the day before. Bristol-Myers shares (NYSE: BMY) added another 60 cents, or 2.19%, to $28.03; Sanofi shares slipped 13 cents further to $44.44.

Repros up ahead of stock deal

Another biotech, which also is based in The Woodlands, Texas, Repros Therapeutics Inc., was sharply higher Tuesday, the above-cited trader said. Another sellside market source confirmed that the company's planned follow-on stock offering was expected to price after Tuesday's close.

Typically, a follow-on stock offering would create selling pressure on a stock, but another trader said it was most likely a situation of the deal underwriters supporting the stock in order to get a better price on the deal when it printed. He said it did not bother him, as he sees the company heading north despite the dilution from the offering.

Repros shares (Nasdaq; RPRX) climbed Tuesday by $1.34, or 10.24%, to settle at $14.42.

"They are saying [the] roadshow went great; we expect allocations to go to top accounts so manage expectations," the trader said. "I think people like this company. They have had some bumps in the road but those are getting ironed out.

Known as Zonagen Inc. until May 2006, Repros concentrates on drugs for male and female reproductive systems. Its lead compound, Proellex, an anti progestin, is in phase 2 clinical trial to treat uterine fibroids in the United States and in a phase 2 study to treat endometriosis in Europe. It also has Androxal in late clinical development, which is designed to restore testosterone production and in a phase 3 clinical trial for testosterone deficiency. Its Vasomax, a Phentolamine-based product is in partial clinical hold in the United States for male erectile dysfunction.

The company announced the follow-on offering plans last week. Repros plans to sell 2.5 million shares via bookrunner CIBC World Markets Corp., co-lead manager Punk Ziegel & Co. and co-manager ThinkEquity Partners LLC.

Tembec extends gains

Extending previous session gains, Toronto-based forest products concern Tembec Inc. was better by another 9% Tuesday.

Tembec shares (Toronto: TBC) gained C$0.25 on the day, or 8.93%, to C$3.05.

Traders said Tembec was still finding buyers on the news Monday of a merger between papermakers Bowater Inc. and Abitibi-Consolidated Inc., which follows the merger of Weyerhaeuser Co. with Domtar Inc. announced last year.

First Bancorp adds 5%

No news was out Tuesday on market chatter the day before that Bank of Nova Scotia has made a written offer to acquire FirstBank, Puerto Rico's third biggest bank, from First Bancorp Holding Co., but the stock continued to rise on the speculation.

First Bancorp shares (NYSE: FBP) added another 53 cents on the session, or 5.09%, to $10.95, following a 9% advanced on Monday.

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