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Makeover Moves in on Aladdin

Trillion-dollar hedge fund BlackRock (BLK - Get Report) has been quietly amassing shares of the Israel-based security software maker Aladdin (ALDN), reaching a 13.5% ownership stake during the third quarter.

While such a move hardly inches the dial at a colossal fund, for the average investor, BlackRock stock picks are often seen as buy signals.

However, traders have yet to fully embrace the stock, which has slowly started to recover lost ground after tumbling from nearly $24 to below $14 in a two-month period. The stock closed Thursday at $17.61.

Aladdin, which is considered a market leader in the software digital rights management (DRM) industry, makes software products and UBS security tokens that prevent unauthorized use of software, and protect copyrights and intellectual property.

Over the past few quarters, the company's revenue sank as sales of its major DRM operation slowed and a secondary offering tanked. Many analysts claim an unstable management is a big part of the reason for slowing sales rather than a slowdown in demand -- a perception which could indicate that BlackRock intends to intervene with a possible management shakeup.

Early in 2005, the company conducted a secondary offering of 2 million shares at about $21 each. A number of institutional investors, including Fidelity Management & Research and Tracer Capital Management took significant interests, hoping perhaps for a rapid growth opportunity. But the security failed to rise to the expectations.
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