Aladdin Knowledge Systems Ltd. (NASDAQ: ALDN) is surging more than 18%, as the company posted strong earnings and upped its 2008 guidance. The Israeli company produces security products that are used to manage network security, including applications for managing content and guarding against computer viruses, spyware, and spam.

Commenting on the results Yanki Margalit, Chairman and CEO of Aladdin Knowledge Systems, stated, "2007 was an exceptional year for Aladdin as we crossed the $100 million mark in annual revenues while driving record levels of operating cash flow and bottom line profitability. Our software security business grew 9 percent year- over-year supported by the launch of HASP SRM, the industry's first software protection and licensing system that offers customers both hardware- and software-based security in a unified solution, while our eToken and eSafe businesses combined to drive enterprise security revenues up a truly impressive 40 percent year-over-year. Overall, Aladdin delivered full year results at the high end of our stated 2007 revenue and net income guidance, excluding the impact of the non-recurring cost recognized in the fourth quarter of 2007.

"From an operational perspective Aladdin made excellent strides in 2007 in terms of leveraging its global presence and driving new customer growth across geographies as well as key business verticals. Overall, demand for content, Internet and enterprise security solutions remains robust, driven by the rising range of IT security threats in mature as well as emerging markets. Based on the combined strength of our portfolio of software and enterprise security solutions, Aladdin has never been better positioned to capitalize on these industry growth trends, building upon our significant financial and operational achievements in 2007," concluded Margalit.

Even with today's surge the stock is trading at a PEG of just 0.95, and is still 20% of its' 52 week high. Aladdin looks like a winner at these levels.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has a position and is long ALDN. He has no positions in any stock mentioned as of 1/23408

MOST NOTEWORTHY: Openwave Systems Inc (NASDAQ: OPWV), Trump Entertainment Resorts Inc (NASDAQ: TRMP) and Accredited Home Lenders Holding Co (NASDAQ: LEND) were today's noteworthy downgrades:

• Openwave Systems Inc (NASDAQ: OPWV) was downgraded to Underperform from Buy at Needham, as the firm no longer believes the company's assets and balance sheet are worth $11/share and expects the franchise to be again disrupted due to layoffs and asset sales. Openwave was also downgraded to Neutral from Overweight at JP Morgan, to Hold from Buy at Wedbush after no superior bid emerged to Harbinger's, and to Sector Underperformer from Outperformer at CIBC World Markets, which cited reduced prospects of a buyout.

• Trump Entertainment Resorts Inc (NASDAQ: TRMP) was downgraded to Underperform from Peer Perform at Bear Stearns citing valuation as upside from a takeout at current levels is remote.

• Accredited Home Lenders Holding Co (NASDAQ: LEND) was downgraded to Market Perform from Outperform at Keefe Bruyette & Woods following its acquisition by Lone Star for $400M.

OTHER DOWNGRADES:

• Bebe Stores Inc (NASDAQ: BEBE) was downgraded to Market Perform from Outperform at Friedman Billings citing new merchandise that lacks a significant casual component to drive business, tough comps, aggressively planned inventory levels for 2H, and the potential for sustained negative comps during the next few quarters.

• Friedman Billings also downgraded Aladdin Knowledge Systems Limited (NASDAQ: ALDN) to Market Perform from Outperform based on valuation and challenges in the U.S. market.

• General Mills Inc (NYSE: GIS) was downgraded to Peer Perform from outperform at Bear Stearns on valuation and concerns with the turnaround plan for Big G cereal division.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).