Takeover rumors continue to swirl around

Siebel Systems

(SEBL)

, pushing the stock to its highest level since early January.

In trading on Friday, shares were up 53 cents, or 6%, to $9.44 on very heavy volume. More than 60 million shares had been traded by 2 p.m. EDT, including a block of 14 million traded shortly after noon.

Short interest in the stock increased by 92% to nearly 23 million shares in April, but it's unlikely that short-selling could have accounted for more than a portion of the massive volume, said Richard Williams, chief software analyst for Garban Institutional Equities.

After taking a major hit when the company announced

a wide first-quarter miss, the stock recovered in late April on rumors that Siebel and

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Oracle

(ORCL) - Get Report

were in acquisition talks. Although it seems likely that there were some discussions between the companies, Wall Street's initial enthusiasm for the rumored deal faded Monday, only to be rekindled Tuesday by speculation that Carl Icahn might buy the troubled software maker.

"With Siebel's recurring revenue stream of maintenance and services tied to CRM software, the opportunity exists for an iconoclast to takeover the stock and take a hatchet to costs. With no regard for future development or just eliminating nonessential overhead, a new management team could turn SEBL into a very profitable company in short order, given the inherent profitability of software sales with gross margins in the mid-90% range," Williams wrote in a note to clients. Garban does not have a banking relationship with Siebel.

It's worth noting, however, that Williams and others said there is no evidence that points to a bid by Icahn, and one source said with some bemusement: "You guys in the press are pumping the stock

by reporting on the rumors."

Still, there's been far too much smoke to believe there's no fire, said Herbert Denton of Providence Capital, who organized a meeting of

unhappy institutional shareholders last month. "I think the company is in play," he said.

There may be more answers on Thursday when Siebel holds its analyst-day meeting in New York. Although it is closed for attendance by the press, the meeting will be broadcast over the Web. Institutional investors have said they will press hard to find out if there was an Oracle offer and whether it was considered by the board.