ArcSight Surges on M&A Talk

CUPERTINO, Calif. (TheStreet) -- Shares of security software maker ArcSight (ARST) surged almost 30% Thursday following a news report that the company is up for sale.

The Wall Street Journal reports that ArcSight has put itself on the auction block. Citing people familiar with the matter, the Journal says that potential buyers, including Oracle (ORCL) and Hewlett-Packard (HPQ) could pay up to $1.5 billion for the company. EMC (EMC), IBM (IBM) and CA (CA) are also possible purchasers, it added.

ArcSight shares rose $8.40, or 29.76%, to close at $36.63 on Thursday. Volume of 4.9 million was more than 10 times the issue's trailing three-month daily average of around 420,000. ArcSight expects to fetch $40 a share, according to the Journal, which said that a deal could happen in the next couple of weeks.

One of TheStreet's top security stocks for 2010, ArcSight makes security management and compliance software, and was recently cited as one of the sector's most attractive acquisition targets. TheStreet's 'Breakout Stocks' portfolio has described ArcSight as "one of the most compelling secular growth stories in the market."

ArcSight only went public in 2008, but has already made a big name for itself, putting out consistently impressive quarterly numbers.

The company's CEO Tom Reilly recently told TheStreet that ArcSight is also on track to reach its target of 18% to 20% operating margin in fiscal 2012.

The software maker, which reports its first-quarter results next week, is also getting plenty of love on Wall Street.

Analyst firm JMP Securities, for example, recently raised its first-quarter and fiscal 2011 earnings estimates for ArcSight, citing a positive near-term outlook for the company.

ArcSight declined to provide comment for this story.

--Written by James Rogers in New York.

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