Shiva Zooms Amid Takeover Talk

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After much suffering, stalwart investors in



are enjoying some time in the sun.

But how long will it last? On a slow Tuesday, rumors of a takeover have helped drive the small networker sharply higher. The company's long-dormant stock gained 2 3/4 to 15 3/4 on more than 5 million shares traded. The company, with average daily volume of about 688,000 shares, last closed this high on March 5.

Also, options trading accelerated rapidly Tuesday. Call volume on the

Chicago Board Options Exchange

increased dramatically. September calls with a 15 strike price soared from 322 contracts on Monday to more than 1,300 on Tuesday. The October calls were also very active.

But no confirmation of a takeover could be uncovered as of Tuesday's close. One trader opined that the takeover rumors began in earnest once Shiva's stock took a surprising turn upward on Monday. The trader suggested that institutional investors may be purchasing shares, then starting the rumors to push up the price and make a quick profit. He says similar things have occurred with

Bay Networks



If Shiva is in play, potential suitors would include the always enigmatic


(CS) - Get Report

and possibly one of the big dogs such as


(CSCO) - Get Report


Shiva's move into the takeover target zone has long been expected. The company traded as high as 85 5/8 last summer before falling on harder times. The firm's inability to develop a cogent Internet strategy, as well as cutthroat competition from rivals such as


(ASND) - Get Report

, has hurt Shiva's prospects. The company used to dominate the corporate remote access switching business.

An investor relations official at Shiva declined to comment on the rumor or the possibility of combining with another company, adding that Shiva has no announcements scheduled for Tuesday.