Analyst Upgrades

• Thoratec (THOR) to buy from neutral at UBS.
• TW Telecom (TWTC) to buy from hold at Citigroup.
• TAL Education (XRS) to overweight from neutral at Piper Jaffray.
• Amedisys (AMED) to buy from hold at Deutsche Bank.

Analyst Downgrades

• Navigators (NAVG) to neutral from outperform at Macquarie.
• El Paso Electric (EE) to hold from buy at Jefferies.
• Hancock Holding (HBHC) to hold from buy at Wunderlich.
• California Water Service (CWT) and American States Water (AWR) to neutral from buy at Janney Capital.
• Mednax (MD) to hold from buy at Deutsche Bank.

With President Obama highlighting the national importance of cyber security, we turn to technology specialist Gregg Early to find the best investment ideas in the sector.

Noting that "cyber security is one of the biggest new sectors in the information technology industry," the editor of Personal Finance offers a trio of buys in the field -- McAfee (NYSE: MFE), Versar (AMEX: VSR), and Unisys (NYSE: UIS).

The advisor explains, "In exchange for an annual fee, McAfee allows users to download the basic security software and regular updates. These frequent updates are essential because virus and malware threats are constantly evolving.

In this series, we take a look at the 25 stocks on the S&P 500 Index (SPX) that have turned in the worst performance during the past decade -- what went wrong, and what happens next.

In my day job, analyzing equities for Schaeffer's Investment Research, I'm always focused on one metric: expectations. They're not always easy to quantify, but investors' and analysts' expectations for a stock more often than not tend to drive its performance. For example, widespread skepticism makes it that much easier for a company's stock to bounce in the event of a positive development. And, on the other side of the coin, we have Unisys Corporation (NYSE: UIS) as a cautionary tale.

What went wrong? At number 7 on our list of SPX losers, UIS lost 86% of its value during the 10-year period that ended June 30, 2008. The shares peaked at $49.69 in September 1999, narrowly exceeding their previous high in October 1987. Shortly after tapping this all-time peak, Unisys would learn a harsh lesson about the danger of high hopes.

In the company's third-quarter earnings report, which hit the Street in October 1999, UIS admitted that revenue grew by just 4%, falling well short of analysts' expectations for an increase of 11% to 12%. Disappointed investors sent the shares plunging 37% over the course of one session, a sharp sell-off that surprised more than a few stock-market veterans. But, as Merrill Lynch analyst Steven Milunovich explained to The New York Times, "This company, under Larry Weinbach, has done nothing but meet and beat expectations. So when they disappoint, it makes it that much worse."

MOST NOTEWORTHY: Canadian Solar, Qimonda and Eagle Test Systems were today's noteworthy upgrades:

• Oppenheimer upgraded shares of Canadian Solar (NASDAQ: CSIQ) to Outperform from Perform after channel checks indicated the company's internal cell ramp is proceeding on plan. They are more positive on shares following the recent pullback.
  
• Qimonda (NYSE: QI) was upgraded to Buy from Neutral at UBS, as they expect the DRAM supply/demand to balance out in the second quarter 2008 followed by undersupply.
  
• Broadpoint raised Eagle Test Systems (NASDAQ: EGLT) to Buy from Neutral after the company reported Q1 results.

OTHER DOWNGRADES:

• EADS (OTC: EADSY) was upgraded to Buy from Sell at ABN Amro.
  
• Jefferies upgraded Unisys (NYSE: UIS) to Hold from Underperform.
  
• BEA Systems (NASDAQ: BEAS) was upgraded to Market Perform from Underperform at Bernstein.

MAJOR PAPERS:

• Singapore Airlines deal to buy 15.7% of China Eastern Airlines (NYSE: CEA), along with their parent Temasek Holding's 8.3% share, may be in jeopardy as Cathay Pacific Airways is said to also be interested in China Eastern, reported the Wall Street Journal.

OTHER PAPERS:

• As a part of its annual report to be released this week, BHP Billiton Limited (NYSE: BHP) is expected to announce that it has uncovered potentially the largest gold reserves in the world at its South Australian Olympic Dam mine, reported the Herald Sun.
• According to the Washington Post, citing congressional investigators, the FBI is investigating technology company Unisys Corporation (NYSE: UIS) after it allegedly failed to detect "cyber break-ins traced to a Chinese-language Web site and then tried to cover up its deficiencies."
• The Telegraph reported that British bank Barclays (NYSE: BCS) is reportedly preparing to sell FirstPlus, one of its subprime consumer loan units, at a loss. Barclays is expected to obtain a price lower than GBP4.5B, the book value of the unit's loan portfolio.
• Microsoft Corporation (NASDAQ: MSFT) will tomorrow release its 'Halo 3' video game and the company expects over $150M in sales in the first 24 hours of its release, and a profit margin that could reach 90%, reported the Los Angeles Times.
• Housing slump or not, Home Depot Inc (NYSE: HD) CEO Frank Blake says there will be no large jobs cuts or store closings, reported the Associated Press.

Back in 2000, several former Microsoft Corp. (NASDAQ: MSFT) employees started Action Engine to capitalize on the growth in the mobile market. While they built standout technology, there was not enough effort on marketing.

But that changed when Scott Silk came on board. For more than two decades, he has served at executive-level positions for companies like Unisys Corp. (NYSE: UIS), Ally Software and Actium Corporation.

As of now, Action Engine is a leader in delivering mobile on-device portal (ODP) solutions, which are downloadable clients that allow for music, video, and other content. Some of the customers include MSNBC.com, TiVo Inc. (NASDAQ: TIVO), Sprint Nextel Corp. (NYSE: S), and Verizon Wireless (a division of Verizon Communications (NYSE: VZ).

In fact, today Action Engine announced that it has raised $20 million in venture capital. The investors include Baker Capital, Northwest Venture Associates and The Spangler Group.

Last week, I had a chance to talk to Silk and get his perspective on Apple Inc.'s (NASDAQ: AAPL) iPhone:

With the market being propelled upward due to private equity and corporate acquisitions, investors should not stay on the sidelines. Rather, they should target private equity's next frontier -- IT services. Of the companies in this sector, Unisys Corp. (NYSE: UIS), Perot Systems Corp. (NYSE: PER) and Ingram Micro, Inc. (NYSE: IM) may be worth examining.

A few months ago, I suggested several sectors and companies that private equity could target next. On Friday, TheStreet.com reiterated one of those sectors -- IT services. Here's how much seven such companies have gone up or down since my March 29th post along with their market capitalizations ranked by their Price/Earnings to Earnings Growth (PEG) ratios:

Brent Bracelin, an analyst with Pacific Crest Securities, is warming up to Dell Inc. (NASDAQ: DELL). He notched his rating from "Sector perform" to "outperform."

And with $12.5 billion in the bank, Dell might start shopping for buyout prey. Why? He thinks the company will want to expand aggressively into the services space -- which would certainly be an extension of its PC business.

Here are some of Bracelin's picks:

Computer Sciences (NYSE: CSC)
Perot Systems Corp. (NYSE: PER)
Unisys Corp. (NYSE: UIS)
TechTeam Global Inc. (NASDAQ: TEAM)

Bracelin thinks Dell might also look at companies with proprietary technology. An interesting target is actually Sun Microsystems (NASDAQ: SUNW).

Although, it's mostly a yawn for the Street. Dell's stock is up $0.25 to $23.76.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Volatility Index S&P 500 Options-VIX up .05 to 12.30

BJ Services Co. (NYSE:BJS) calls active at low implied volatility on M&A chatter.
BJS, a provider of pumping and oilfield services for the petroleum industry, is recently up $0.51 to $27.24 on unconfirmed chatter Halliburton Co. (NYSE:HAL) is interested in BJS. BJS has a market cap of $7.9 billion with long term debt of $499 million. BJS reported annual 2006 sales of $4.3 billion. BJS call option volume of 15,700 contracts compares to put volume of 1,923 contracts. BJS April option implied volatility of 32 is below its 26-week average of 35 according to Track Data, suggesting decreasing price risk.

Unisys Corp. (NYSE:UIS) implied volatility indicates Flat risk; UIS mentioned as target of Dell Inc. (NASDAQ:DELL).
UIS, a technology services and solutions company, is recently up $0.16 to $8.59. Dow Jones reported on 3/21 that Michael "Dell said in China that one of his company's top priorities is to boost its services business and that there will likely be acquisitions in that area." Dow Jones listed BE, SAPE & UIS as potential targets. DELL has a market cap of $52 billion. UIS has a market cap of $2.9 billion with long term debt of $1 billion and annual 2006 sales of $5.7 billion. UIS overall option implied volatility of 38 is near its 26-week average according to Track Data, suggesting non-directional price risk.

Option volume leaders today are: Apple Inc. (NASDAQ:AAPL), Motorola Inc. (NYSE:MOT) and Palm Inc. (NASDAQ:PALM).

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.