PairGain Stock Drops as Takeover Talk Subsides

PairGain Technologies Inc.’s stock fizzled Tuesday as analysts deflated takeover rumors that had driven the Tustin-based telecommunications equipment maker’s price up nearly 66% a day earlier.

The stock fell $2.13 a share Tuesday, closing down 16% at $11.50 in a second day of heavy trading. More than 15.8 million shares traded on the Nasdaq exchange, making the stock the eighth most active in U.S. markets.

On Monday, volume totaled 20.7 million shares, the third highest in U.S. markets, as the stock climbed $5.41 a share to $13.63.

“What we’re seeing is everyone jumping on the bandwagon, but once the trigger is pulled and no takeover materializes, it’s over until the next time,” said Richard Woo, networking analyst at Thomson Kernaghan & Co.

As industry giants gobble up smaller players in the race for dominance, specialized telecommunications and data equipment makers have become increasingly attractive to investors.

Rumors that PairGain could be a takeover target have circulated since June, when telecommunications firm L.M Ericsson of Sweden said it was holding acquisition talks with various data network equipment companies in the U.S.

Analysts have also said Lucent Technologies Inc. could be another potential suitor.

Sources at PairGain and Lucent denied the rumors. Officials at Ericsson could not be reached for comment.

PairGain sells products that speed up Internet access over standard copper wires, a technology known as digital subscriber line service, or DSL.

“The action in these small- to mid-cap stocks right now is due to speculations of takeovers,” Woo said. “Anyone who wants to beef up their portfolio with DSL technology might look at PairGain.”

Reuters contributed to this report.