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McAfee (MFE) shares were up for a second day following Wednesday's news that the company’s top two execs have been axed in response to its stock-options backdating prove. One reason: speculation that the company might be takeover bait.

UBS analyst Heather Bellini considers it a possibility. She raised the suggestion in a report Thursday morning, in which she also raised her target price on the stock.

“MFE’s situation could be similat to what MERQ [Mercury Interactive] went through last year,” she says. “After a year-long investigation into the company’s option backdating practice, MERQ’s chairman and CEO, CFO and General Counsel all resigned. HP later announced its intention to acquire MERQ. with the executive departures at MFE, we believe the company could also become a potential M&A candidate.”

Bellini today raised her price target on the company to $32, from $25. She notes that the stock trades at a discount to it peers on a P/E base, an enterprise value/sales basis and on a P/E basis on 2007 estimates, after backing out the company’s cash position.

Walter Pritchard, an analyst at Cowen & Co., likewise considered the possibility of a takeover in his assessment of the stock this morning. “The stock continues to trade at a meaningful discount to peers buy gap has been closing as investors look for take-over targets in the consolidating software lanscape,” he says. “We’ve always looked at MFE as a potential takeover target as HP (NYSE:HPQ) and Cisco (NASDAQ:CSCO) lack client and content security. [The] stock has begun to trade more on recent takeover speculation as investors look at the pattern of events at MERQ (options issue/managment dismissal/sale of company.) We’d agree that yesterday’s events make it more likely the board looks to sell the company, but inputs around [the third quarter] suggest some enterprise softness and therefore we don’t believe [the quarter] will necessarily be a positive catalyst.” He continues to rate the stock Outperform.

Source: McAfee: Takeover Target With Options Issue Behind It?