Bloomberg News reports that Harris Corp. (NYSE: HRS) denied rumors that it is seeking a takeover. The stock is down 16% on that announcement. However, Harris did say that it has received expressions of interest.

This shows how treacherous it can be to invest in takeover rumors. I reported on such a rumor on May 16. Between that report and Friday, Harris stock rose 6% from $62 to $65.78. But with this morning's denial of takeover rumors, that entire gain is lost -- and more. A look at Harris's stock chart suggests that I was late to the party.

The interesting thing about the denial is that it comes in the wake of reports that Harris had received offers that valued the company at $10 billion -- or $74 a share -- which is less than the $75 to $85 a share it expected. It looks like Harris could be playing a game to encourage a higher bid. I'll keep watching.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Harris (NYSE: HRS), an electronics and defense company, is recently trading at $60.22 in pre-open trading, above its close of $54.41 Thursday.

The Wall Street Journal reported HRS has begun exploring its strategic options, and could eventually choose to sell itself, according to people familiar with the matter.

HRS overall option implied volatility of 30 is below its 26-week average of 34 according to Track Data, suggesting decreasing price risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

MOST NOTEWORTHY: WSP Holdings, Harris and XTO Energy were today's noteworthy initiations:

• Oppenheimer believes WSP Holdings (NYSE: WH) is benefiting from rapid growth in the oil and gas exploration market and a move toward deeper and harsher environment drilling. The firm has an Outperform rating and $9.50 target on the stock.
  
• UBS assumed Harris (NYSE: HRS) with a Buy rating and $63 target, as they see upside to the company's FY09 estimates driven by RF Communications. UBS views the recent pullback as a buying opportunity.
  
• Morgan Keegan is positive on XTO Energy's (NYSE: XTO) projected 20% production growth, value building through acquisitions, and valuation; shares were initiated with an Outperform rating.

OTHER INITIATIONS:

• Goldman started Philip Morris (NYSE: PM) with a Buy rating and $60 target.
  
• Lamar Advertising (NYSE: LAMR) was assumed with a Sell rating at Merrill Lynch.
  
• Broadpoint initiated Nova BioSource (AMEX: NBF) with a Buy rating.

MOST NOTEWORTHY: UnitedHealth Group Inc (UNH), Aetna Inc (AET), Hercules Inc (HPC) and Alcatel-Lucent (ALU), were today's noteworthy initiations:

• Jefferies started UnitedHealth Group inc NYSE: UNH) with a Hold rating and $48 target and said near-term risk is still present due to unfavorable reserve adjustments to the company's commercial risk business and high expectations for improvement in the company's commercial medical care ratio.

• Aetna Inc (NYSE: AET) was also initiated by Jefferies with a Hold rating based on valuation.

• Credit Suisse started Hercules Inc (NYSE: HPC) with an Outperform rating and $24 target.

• Matrix USA initiated Alcatel-Lucent (NYSE: ALU) with a Hold rating on valuation...

OTHER INITIATIONS:

• Cowen is positive on MIPS Technologies, Inc (NASDAQ: MIPS), starting the company with an Outperform rating, and expects a deal with Microchip Technology Inc (MCHP) to be announced soon.

• JP Morgan initiated shares of Headwaters Inc (NYSE: HW) with a Neutral rating.

• Needham assumed coverage of Harris Interactive Inc (NASDAQ: HPOL) with a Hold rating.

• ThinkEquity started Aruba Networks, Inc (NASDQ: ARUN) with an Accumulate rating and $15 target.

• Lazard initiated shares of Cyclacel Pharmaceuticals Inc (NASDAQ: CYCC) with a Buy rating and $11 target.

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