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Investors bullish on report HP will acquire McAfee

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Wall Street investors showed new optimism in the shares of anti-virus provider McAfee after financial analysts speculated it may be acquired by Hewlett-Packard.

On Monday, shares in McAfee rose $1.44 to $41.57, the biggest gain in two months following a report from Friedman Billings Ramsey & Co. that an acquisition of the security software company would help HP compete against Cisco Systems. Trading in options, which give an investor that right to buy shares at an agreed-upon price, reached its highest level in close to a decade, according to Bloomberg BusinessWeek.

More than 31,500 call options to buy McAfee stock changed hands during regular trading on Monday. That was 81 times the four-week average and 10 time the level for puts to sell, the publication said. The most active options were those to buy McAfee at $45 by June 18, followed by those to buy the shares at $45 by May 21. McAfee hasn't closed above that amount since October, according to Yahoo Finance.

"The addition of McAfee would significant strengthen the company's presence in security and develop a competitive edge" on Cisco, the Friedman Billings report stated. It went on to predict that mergers and acquisitions in the software industry would accelerate this year and next.

The spike in the number of options for May and June are signs that some investors agree. They stand to profit if McAfee shares rise above $45. ®

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