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Upgrade drags Witness Systems out of doldrums

Witness Systems shares rocketed up 6 3/16, or 74 percent, to 14 9/16 Monday after Chase H&Q, which helped bring the software developer public in February, upgraded the stock from a "buy" rating to a "strong buy."

Witness Systems (Nasdaq: WITS) makes software that helps companies monitor interactions between employees and customers.

"We did a lot of channel checks and talked to customers and management and it appears that Witness is building ahead of where they were even two or three months ago," said analyst Jim Pickrel. "They've been trading around two-times cash, so it appears to be a good buy right now for investors."

Pickrel has a six-month price target of $25 a share and expects the company's cash flow to reach the breakeven point sometime in the next quarter or two.

In February, Witness Systems rolled out a 3.8 million-share initial public offering with Chase H&Q serving as lead underwriter. USB Piper Jaffray and SoundView Technology co-managed the offering.

After soaring up to a high of 44 15/16 in March, Witness Systems fell to an all-time low of 4 3/4 in April.

Last quarter, it posted a loss of $1.7 million, or 8 cents a share, on sales of $7.7 million.

First Call Corp. consensus expects the Alpharetta, Ga.-based company to lose 6 cents a share in the second quarter and 18 cents a share in the fiscal year.

Witness Systems competes with the likes of NICE Systems (Nasdaq: NICE) and Comverse Technology (Nasdaq: CMVT).