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.

Analyst Upgrades

• Soleil upgraded Hologic (HOLX) to buy from hold on expectations the company's next-generation breast tomosynthesis instrument is likely to receive FDA approval. The firm raised its target price for shares to $20 from $16.
• ING Group upgraded Total (TOT) to buy from hold.
• BofA/Merrill raised Medicis (MRX) to neutral from underperform.
• CPFL Energia (CPL) was upgraded to buy from hold at Deutsche Bank.

Today was another up day, mostly thanks to the new Basel III banking accords showing that most banks are actually not in need of fresh capital any time in the immediate future. We also saw Warren Buffett refute that there is a double-dip recession and we also had a slightly less-atrocious August Treasury deficit than expected. This was a day where traders began putting back on the risk trade.

Here were today's closing bell levels:

DJIA
S&P500
NASDAQ

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.

Analyst Upgrades

• Wells Fargo upgraded Gap (GPS) to outperform from market perform, citing valuation and expectations for EPS to grow in FY11. The firm thinks consensus estimates are achievable and has a $20 to $22 target valuation range for shares.
• BMO Capital upgraded Abercrombie (ANF) to outperform from market perform and has a $43 target on the stock. The firm believes Abercrombie's domestic business is turning and that the company is beginning to take share from competitors.
• Piper Jaffray upgraded Codexis (CDXS) to overweight from neutral as it believes Shell's (RDS.A) biofuel commercialization plans and a potential carbon capture partnership present near-term catalysts for the stock. The firm upped its target for shares to $12 from $11.
• Tortoise Energy Capital (TYY) and Tortoise Energy (TYG) were upgraded to buy from hold at Wunderlich.
• Comerica (CMA) was upgraded to outperform from neutral at Baird.
• Methanex (MEOH) was upgraded to strong buy from outperform at Raymond James.

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

• Abercrombie & Fitch Co. (NYSE: ANF) earnings prospects and declining sales resulted in a downgrade.
• America's Car-Mart Inc. (NASDAQ: CRMT) stronger-than-expected Q1 results led shares to a four-year high.
• ArcSight Inc. (NASDAQ: ARST) reported strong Q1 numbers on increasing demand for cyber security.
• Brown-Forman Inc. (NYSE: BF.B) Q1 results easily topped expectations despite a decline in revenue.
• Ciena Corp. (NASDAQ: CIEN) posted a Q3 loss but revenue improved sequentially, and shares rose.

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.

In last week's preview we took a peek at expectations for Campbell Soup earnings, but now the company is scheduled to report fiscal fourth quarter results this coming Thursday. With Krispy Kreme also among the handful of companies scheduled to report this week, we may yet see whether consumers are turning to comfort foods in these uncertain times.

Campbell Soup Co. (NYSE: CPB), the world's biggest soup maker, is still expected by analysts surveyed by Thomson Financial to post net income of 25 cents per share (up 44.0% from a year ago) on revenue of $1.7 billion (up 7.4%). The Camden, N.J.-based company has just missed earnings estimates in the past few quarters. Its long-term EPS growth forecast is 7.9%, which is less than the industry average, but about the same as rivals Kraft Foods (NYSE: KFT) and HJ Heinz (NYSE: HNZ). The analysts' consensus recommendation is currently to buy Campbell.

Hip, Canadian apparel retailer Lululemon Athletica Inc. (NASDAQ: LULU) is also anticipated to be a big earnings gainer when it reports this week. Net income is expected to come in at 13 cents per share (up 46.2% from a year ago) on revenue of $88.2 million (up 50.3%). Lululemon met expectations when it reported 12 cents per share in the previous quarter. Its long-term EPS growth forecast is a healthy 40.2%, which is better than the industry average and that of rival Under Armour Inc. (NYSE: UA). The analysts' consensus recommendation is currently to buy Lululemon.

It's been rough since Sourcefire Inc. (NASDAQ: FIRE) went public last year. The stock went from $18.83 to a low of $5. The company, which provides cutting-edge security technologies, has been missing analyst estimates and can't seem to get the confidence of investors.

Well, Sourcefire has now attracted a hostile bidder -- Barracuda Networks, which is offering $7.50 per share. As a result, Sourcefire's stock price is now trading at about $7.65. Of course, the company has rejected the offer (indicating that is far too low).

To get a perspective on things, I had a chance to talk to Nick Selby, who is the senior analyst of enterprise security at the 451 Group. According to him, the bid is indeed too low. If anything, this could entice other bidders to the table.

In fact, he thinks other broken IPOs may be buyout targets, such as ArcSight (NASDAQ: ARST).

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 MergerBook.com.

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.

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