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Rubicon shares rise on predictions of improvement

NEW YORK (AP) -- Shares of Rubicon Technology Inc. jumped Monday on analyst predictions that sapphire industry conditions are about to improve.

THE SPARK: Sterne Agee analyst Andrew Huang boosted his rating for the LED chip maker to "Buy" from "Neutral," saying that based on talks with top companies in the sapphire supply chain, he thinks that overall demand is picking up.

THE BIG PICTURE: Bensenville, Ill.-based Rubicon makes and sells sapphire crystal products for use in LED, HD-DVD and Blu-ray products, along with other applications.

In February, the company said its fourth-quarter loss widened, hurt by lower prices that reduced its revenue.

The company also warned at that time that it was taking more orders to reduce inventories and maintain customer relationships, resulting in further price drops. It forecast an even bigger loss for the first quarter.

THE ANALYSIS: Huang said the uptick in demand is being driven by LEDs for both backlighting and lighting. Companies within the sapphire supply chain are quickly increasing their capacities and pricing has likely hit bottom, with many suppliers now trying to raise their prices.

Huang predicted that pricing for both core and wafers will increase slightly for the June quarter and again for the September quarter.

In addition, it's almost certain that several new smartphones coming out in the second half of this year will include sapphire camera lenses, which will help use up any extra supply, he said.

THE SHARES: Up 71 cents, or 11 percent, to $7.15 in heavy midday trading, after peaking at $7.28. Over the past 52 weeks, the company's shares have traded between $4.83 and $11.57.

Rubicon shares have risen about 6 percent since the start of this year.