The stock of Aether Systems Inc. rose as much as 39 percent in record trading yesterday on an Internet rumor that computer giant IBM Corp. had made an offer for the Owings Mills wireless technology company.
Officials of Aether and International Business Machines declined to say whether a deal was pending.
Aether spokesman Greg Abel speculated that investors might have been reacting positively to the company's conference call with analysts Wednesday, although the stock rise was more modest that day.
Aether's stock closed up 87 cents, or 25 percent, to $4.29, having reached $4.77 after the rumor surfaced shortly before noon. The percentage gain was the third-highest of any stock on the Nasdaq yesterday.
The 10.7 million shares traded yesterday were as many as had ever been swapped in a day for the stock, including when Aether went public in October 1999.
A financial news Web site, briefing.com, reported at 11:33 a.m. yesterday that IBM had offered $9.50 a share for Aether. The Web site referred to "trading floor rumors." Aether's closing price Wednesday was $3.42.
"It seems a little rich, but it sounds like something is afoot," said Timothy Quillen, an analyst for Stephens Inc. in Little Rock, Ark.
IBM is active in wireless data transmission, Aether's area of expertise. Aether makes software to send data between wireless devices for various industries, including transportation, public safety and finance. The company's products have been used recently by law enforcement at the Super Bowl and to bolster security at Logan International Airport in Boston.
A deal would come at a bleak period for the company, which employs about 650 people, half of them in Owings Mills. The company's stock closed Tuesday at an all-time low of $3.06 a share, just before Aether reported for the first quarter a 23-percent drop in revenue and slightly better earnings than expected.
Shares of IBM closed at $79.93 yesterday, down $2.52.
Aether has laid off 700 people during the past year to conserve cash. With $477 million in reserve, it has enough cash to remain in business for years while it awaits a turnaround in corporate technology investment, said David S. Oros, Aether's chairman and founder.
But analysts have soured on its prospects lately. Merrill Lynch & Co. Inc. downgraded Aether to "sell" from "neutral" just a half-hour before the IBM rumor circulated yesterday.
Like Aether, IBM has worked on wireless technologies for business since the mid-1990s. It has about 3,000 of its 320,000 employees worldwide dedicated to wireless technology, according to Business & Technology Wireless, an industry Web site. Also like Aether, IBM has developed technology for the RIM BlackBerry handheld device. IBM's wireless division also concentrates on many of the same industries as Aether.
In an interview in December, Aether President George M. Davis was discussing how the company had outlived many smaller companies that had sprung up during a capital boom for technology startups two years ago. The large technology companies would be Aether's competition in the future, he said. "We've said that when all the dust settles, we'll look out the window and we'll see IBM," Davis said.
How close out the window, he didn't say at the time.