Schaeffer's Midday Options Update Features Sprint, Cisco Systems, Hewlett-Packard, Krispy Kreme Doughnuts, and Advanced Micro Devices.

CINCINNATI -- Today's Schaeffer's Midday Options Update Features Sprint (NYSE:FON), Cisco Systems (NASDAQ:CSCO), Hewlett-Packard (NYSE:HPQ), Krispy Kreme Doughnuts (NYSE:KKD), and Advanced Micro Devices (NYSE:AMD). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1 .

Sprint-ing Sideways?

Between the Cisco Systems (NASDAQ:CSCO) earnings announcement and Hewlett-Packard's (NYSE:HPQ) leadership change, technology seems to be ruling the Street today. Shares of HPQ have rallied sharply following the announcement, jumping nearly six percent before midday. After nearly six years at the helm of HPQ as chairwoman and CEO, Carly Fiorina stepped down from on high today, with the company quickly replacing her with CFO Robert Wayman in the chief executive slot on interim basis, while Patricia Dunn was tapped to for the chairwoman position. In a statement released with the announcement, Fiorina lamented the move: "While I regret the board and I have differences about how to execute HP's strategy, I respect their decision."

The Cisco Kid is Beaten on the Draw

It was a showdown at the earnings corral after sundown last night, with the Cisco Kid facing off against Wall Street's consensus estimates. CSCO came out slinging, posting net income of $1.4 billion, or 21 cents per share, topping last year's $724 million, or 10 cents per share. Excluding one-time gains and charges, the kid's earnings edged higher to $1.5 billion, or 22 cents per share, but arrived merely in line with the Street's estimates. However, it was CSCO's sales figures that failed to hit the mark, as sales climbed to $6.06 billion, sailing short of the consensus forecast for $6.13 billion. Normally, this would not have kept CSCO from getting in a parting shot, but the company expects third-quarter sales to arrive "flat to up 2 percent" when compared with the second quarter, or eight to 10 percent higher than the same period last year. This guidance translates into sales of roughly $6.07 billion to $6.18 billion, once again whiffing the Street's expectations for $6.23 billion. The kid was last seen riding off into the sunset, down nearly two percent in trading so far today.

Analysts Test Tenacious Tech

CSCO and HPQ were not the only tech stocks receiving attention today, as analysts took this opportunity to weigh in on a slew of varying technology concerns. In the semiconductor sector, Morgan Stanley lifted its rating on Advanced Micro Devices (NYSE:AMD) to "overweight" from "equal weight," noting that it expects the company to gain market share and expand its gross margins and operating margins in processors, thus driving solid earnings growth in 2005 and 2006.

Doughnut Holes

Late on Tuesday night, Krispy Kreme Doughnuts (NYSE:KKD) announced that it will cut 25 percent of its employees in its corporate, distribution, and manufacturing operations in order to save about $7.4 million a year. The company also warned that it remains in financial peril, stating that it is unable to borrow money. While KKD did not go into detail on the exact number of jobs included in the plan, according to the company's website, it employs a total of 3,913 workers. Also as part of the deal, KKD will take a first-quarter cash charge of $600,000. And, as if things couldn't get any worse, KKD has also stated that it has permanently grounded its corporate plane, a move which will save the company $3 million but involves a cash charge of approximately $300,000.

Most-Active Options Update

At 1:40 p.m. eastern time, the Dow Jones Industrial Average (DJIA - 10,697.3) is down 0.26 percent and the S&P 500 Index (SPX - 1,197.27) is lower by 0.42 percent. The Nasdaq Composite (COMP - 2,068.6) is down 0.87 percent. At 1:41 p.m. in the options pits, 1,778,267 calls and 1,308,186 puts traded for a composite put/call ratio across all six exchanges of 0.73. The CBOE put/call ratio for equity options weighed in at 0.70.

Sprint

Taking a break from the technology sector, today's options activity points us in the direction of telecommunications firm Sprint (NYSE:FON). Merger activity has been the name of the game in the telecom sector, most notably and recently is the high profile merger between SBC Communications and AT&T. FON has joined in this round of consolidation in the sector by offering up a bid for rival Nextel Communications (NXTL). However, since this announcement, FON has had a bit of a rocky road to haul.

Prior to December 15, the date that the NXTL deal was officially announced, FON had been in a solid uptrend since July 2004, defined by support from its rising 10-week and 20-week moving averages. The recent bout of turbulence for the equity has called into question this support, allowing FON to breach its 10-week on two separate occasions since. Furthermore, the stock is trading back below this intermediate-term trendline this week. Of particular note for the equity is its recent rejection at the 25 level, and subsequent breach of long-term support at the 24 level. While the former rejection should have been expected given the enormous buildup of call activity at this strike in the front three months of options, the breach of the 24 level should be of some concern to FON investors.

Checking in on the security's sentiment backdrop, we find a developing picture that raises a few contrarian flags. On the options front, speculative investors appear to be holding onto hope for FON, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.38 ranks below 87 percent of all those taken in the past year. That's not to say that a movement isn't out there to pull this ratio in a more bearish direction, as FON's SOIR has jumped heartily over the past several trading sessions from its February 7 reading of 0.36 in the third percentile. However, this reading still lingers near a bullish extreme despite recent activity. Furthermore, today's trading in the options pits has seen more than 5,700 bullishly oriented calls cross the tape at FON's March 25 strike, but whether or not these are close outs or additions will be left for tomorrow to decide.

Slipping into a couple other quantitative indicators, FON's short-interest reading is somewhat misleading. During January, the number of FON shares sold short leapt 37 percent higher to 67.4 million, its highest reading in the past four years. This spurt of bullish activity also launched the percentage of float shares sold short higher to 4.63 percent. Despite these two readings, it would still take a modest 3.25 days to cover this accumulation of bearish bets at the stock's average daily trading volume, leaving the strength of a FON short-covering rally open to debate.

Most concerning for the stock is Wall Street's level of comfort with FON's current situation. According to Zacks, analysts currently hold 13 "buys," five "holds," and one lone "strong sell" rating on the shares. Should the equity continue in its backslide, any downgrades from this cheery bunch could cause trouble for FON going forward. While FON is probably primed for a bit of sideways movement for the time being (barring any unforeseen revelations from the firm), investors should keep an eye on resistance at 25 and support at the stock's rising 20-week moving average, as a breach of either of these levels could be indicative of a change in trend for the security.

Click on the following link to see the Weekly Chart of FON since July 2004 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=12481&obspage=2 .

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About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .