Shares of portable storage maker SyQuest jumped more than 40 percent this morning, but with shares trading for less than $1, that's a pretty easy feat to pull.
What hasn't been an easy trick is setting the company on a profitable path. Despite a major reorganization more than a year ago that put in place a new management team and corporate logo, and another restructuring last August that wound end up cutting 50 percent of its workforce, SyQuest has posted consecutive losses.
In June Compaq said it would offer the company's SparQ 1.0 internal removable cartridge drive in build-to-order PC systems, but SyQuest's stock has continued to fall from its $5 a share perch a year ago. The stock is now trading below $1 dollar, making it a penny stock.
Analysts note that the low share price makes the company ripe for a buyout. "They may be an acquisition target for a hard disk drive company who wants to add removable storage to their business," said Howard Rosencrans, an analyst at HD Brous & Co. in Long Island, New York.
"Any buyer probably won't pay a premium [over the stock price]. The company, at most, is worth a few cents a share."
Last July, the company hired CIBC Oppenheimer as its investment advisor on strategic and financial alternatives. CIBC's role may also include negotiating transactions with other companies such as strategic partnerships for manufacturing, joint ventures, or acquisitions, the company stated at the time.
SyQuest executives were not immediately available for comment.
Robert Amatruda, an analyst with International Data Corporation, said the hard drive industry is finally emerging from a market that had seen an oversupply. And while SyQuest would be complimentary technology to a hard drive maker's business, it's still a niche market.
Rosencrans, who expects SyQuest to post a fourth-quarter loss and revenues upward of $30 million, said the business model for portable storage makers is more at risk with the advent of the Internet. "People aren't sure if they need portables. The Net can be used as a storage and transfer medium," he said.
SyQuest is also facing competition from cheaper hard drives and PCs with greater capacity hard drives. But Amatruda contends SyQuest will continue to play a role by extending consumers' hard drive capacity and, on the professional side, finding use as a data interchange tool.