Analyst Upgrades

• Piper Jaffray upgraded Salesforce.com (CRM) to overweight from neutral, citing valuation following the recent sell-off and strong business trends. The firm has a $115 price target for shares.
• Keefe Bruyette upgraded M&T Bank (MTB) to market perform from underperform on valuation after AIB sold its stake in the company. The firm has a $72 price target for shares.
• Jefferies upgraded OGE Energy (OGE) to buy from hold following the announcement that ArcLight will purchase 9.9% of OGE's interest in Enogex for $183M and believes this deal highlights the hidden value associated with Enogex. The firm raised its price target to $51.50 from $43.
• Thomas & Betts (TNB) was upgraded to outperform from perform at Oppenheimer.
• Bayer (BAYRY) was upgraded to buy from neutral at UBS.
• Texas Roadhouse (TXRH) was upgraded to outperform from neutral at Baird.

In late August, a report from the Wall Street Journal indicated that security software provider, ArcSight (ARST), was in the process of selling itself. The stock shot up to $38 per share.

And yes, ArcSight found a buyer: Hewlett-Packard (HPQ). The company has agreed to pay $43.50 per share, or roughly $1.5 billion. However, the shares of ArcSight are about 50 cents above the bid, indicating that another suitor may jump in. But for investors, it would be risky to speculate on this one. After all, ArcSight has already undergone an auction.

Every day, there seems to be a headline about some type of online security breach. Just look at the recent denial-of-service attacks at Twitter and Facebook. Yes, it seems that no one is immune from the perils of the electronic world.

Interestingly enough, this is good news for ArcSight (NASDAQ: ARST), which develops a variety of security solutions. To get a sense of this, look at the company's fiscal Q1 results (which came out Thursday).

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Aeropostale Inc. (NYSE: ARO) reported strong Q4 numbers as same-store sales increased.
• American Eagle Outfitters Inc. (NYSE: AEO) same-store sales fell in Q4 but earnings met expectations.
• ArcSight Inc. (NASDAQ: ARST) continued its growth in Q3 and it forecast continued growth.
• Buckle Inc. (NYSE: BKE) posted a better-than-expected Q4 profit and continued same-store sales growth.
• Citigroup Inc. (NYSE: C) CEO said in a memo that it earned a profit in the first two months of this quarter.
• Dick's Sporting Goods Inc. (NYSE: DKS) beat Q4 earnings estimates but same-store sales fell.

About a year ago, ArcSight Inc. (NASDAQ: ARST) pulled off an IPO. For the tech sector, it was one of a handful of public offerings.

In fact, the company, which provides compliance and security management technologies, has done quite well since its debut. Revenues increased 30% and the company picked up more than 200 new customers. During this time, cash flow increased by $14 million.

MOST NOTEWORTHY: Mako Surgical, ArcSight and ICU Medical were today's noteworthy initiations:

• Mako Surgical (NASDAQ: MAKO) was initiated with an Overweight rating at JP Morgan. The firm believes Mako has the most compelling system for navigated, robotic assisted orthopedic surgery to date.
  
• After ArcSight (NASDAQ: ARST) reported better-than-expected results for its Q3 and guidance for Q4 that Wachovia views as positive, the firm, which initiated shares with an Outperform rating, expects that regulatory compliance initiatives such as SOX will help protect the company from the slowdown, and help result in upward revisions to Wachovia's estimates in the future, as well as margin expansion.
  
• Soleil believes ICU Medical's (NASDAQ: ICUI) close distributor relationship with Hospira (NYSE: HSP) will drive its CLAVE/Custom IV franchises. The firm started shares with a Buy rating and $33 target.

OTHER INITIATIONS:

• Bear initiated Journal Comm (NYSE: JRN) with an Outperform rating and $10.25 target.
  
• Royal KPN (NYSE: KPN) was initiated at Societe Generale with a Sell rating.
  
• Broadpoint assumed Nuance Comm (NASDAQ: NUAN) with a Buy rating and $22 target.

So far this year, the IPO market has been meager. But we did see a deal yesterday; that is, ArcSight (NASDAQ: ARST). Unfortunately, the stock fell 2.4% to $8.78 on its debut (the company's price range was $9-$11).

Although, the company is in the red-hot security space and has more than 400 customers. For the first six months ended October 31, 2007, revenues came to $44.4 million, which was up from $27.7 million.

So, might there be an opportunity here?

Well, I had a chance to interview the CEO of LogLogic, Pat Sueltz. The company plays in the same space as ArcSight. In fact, her company recently snagged $13.5 million in venture capital.

Here's her take on things:

Background on your company? What are some of the trends in your industry?

Funded by Sequoia Capital and Telesoft Partners in 2004, San Jose-based LogLogic is the largest independent vendor in the multi-billion dollar log management market. LogLogic attributes its hyper-growth to compliance mandates such as the Payment Card Industry Data Security Standard (PCI DSS) as well as pressures to automate the tracking of user activity and business performance while reducing costs.

One of the promising applications for log management is Security Information and Event Management (SIEM), as addressed by vendors such as ArcSight. According to recent studies from ESG and the SANS Institute, security, risk and compliance issues comprise only 30% of all log management use cases.

Log management continues to be a house-keeping best practice for IT managers but, today, failure to meet governance, risk and compliance standards carries serious consequences for a company and its C-level executives. Organizations are making log management a priority and they are quickly reaping the benefits, from the sys-admin up the chain of command to the CEO.

Your thoughts on the ArcSight IPO?

Log management is a multi-billion dollar market opportunity and growing rapidly. It is too early to tell on the first day of an IPO, but ArcSight is valued at a quarter of a billion dollars, which speaks to the sector's promise.

ArcSight's public offering is an important statement indicating the market requirement for stand-alone security management. Similarly, log management solutions cut across all enterprise application silos. Every application with an IP address or digital heart-beat generates important activity records that need to be monitored, managed and archived for future reference. LogLogic provides open web-services enabled platforms that are vendor neutral for this market place.

What was the recent venture funding process like?

Our series D round was straightforward and quick. We reached cash flow positive last fall and have seen more than 100% growth year-to-year due to industry demand. In 2007 alone, LogLogic signed over 160 new customers in the enterprise, mid-market and MSSP channels, bringing its total to more than 400 customers. As a result of our 2007 success, we received interest from a number of outside investors, which was an opportunity for us to ramp up global sales and marketing initiatives and accelerate our technology innovation.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

It seems like a breach of a company's internal systems, such as customer databases, is a daily occurrence. This makes it a lucrative market for security software vendors. According to a report from IDC, the market is expected to be nearly $1 billion this year – and could reach $2.2 billion by 2011.

A leader in the space is ArcSight, which has recently filed for an IPO.

Think of the company's software as a "mission control center" that manages critical information in real-time. If there are some vulnerabilities detected, ArcSight will send out alerts and recommend action.

The company has more than 350 customers and an extensive network of partners, such as Cisco (NASDAQ: CSCO), IBM (NYSE: IBM) and Oracle (NASDAQ: ORCL)

Over the past year, ArcSight increased revenues from $39.4 million to $69.8 million. However, there was a hefty net loss of $16.7 million.

The lead underwriters on the IPO include Morgan Stanley (NYSE: MS) and Lehman Brothers (NYSE: LEH). The proposed ticker symbol is "ARST."

You can find the prospectus at the SEC website. Also, if you want to check out more IPOs, click here.

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