Oct. 12 (Bloomberg) -- Eastman Kodak Co. rose the most in two months after investors speculated the world's largest photography company is a takeover candidate and Lehman Brothers Holdings Inc. said it may report profit above estimates.

Kodak may be acquired by Hewlett-Packard Co., the world's biggest maker of personal computers, the Financial Times' Mergermarket Web site reported, citing unidentified industry sources.

``As a matter of practice and policy, we don't comment on movements in our stock,'' said Kodak spokesman Dave Lanzillo. Hewlett-Packard spokeswoman Emma McCulloch said the company doesn't comment on rumor or speculation.

Kodak has been steering away from traditional film and developing new sensors to help increase revenue from digital imaging. Today, the company said it will end its century-long Olympic sponsorship after the 2008 Beijing games as it changes its strategy following losses in eight of the 10 past quarters.

Lehman analyst Caroline Sabbagha said she expects Kodak to ``meet or even beat'' her earnings estimate of 39 cents a share. Her forecast exceeds the 28 cents a share expected by four analysts, according to a Bloomberg poll. Sabbagha has an ``equal- weight'' rating on Kodak shares.

Kodak, based in Rochester, New York, is scheduled to release its results on Nov. 1.

Kodak's shares gained $1.43, or 5.3 percent, to $28.47 at 4 p.m. in New York Stock Exchange composite trading. They have climbed 4.9 percent this year before today, compared with a 9.6 percent advance in the Standard & Poor's 500 Index. Hewlett- Packard fell 6 cents to $51.55.

Options traders increased their bets that the stock would reach $30, a level it hasn't exceeded since April 2005, within the next week.

`Creeping anticipation'

Implied volatility, the key factor in determining the value of option contracts, rose to 49.54 percent, the highest in four years, from 44.93 percent. An increase indicates traders anticipate bigger swings in the stock price.

``The rumor has been circulating for the last couple of days,'' said Rebecca Engmann Darst, an equity options analyst at Interactive Brokers Group in Greenwich, Connecticut. ``There's been a creeping anticipation of greater volatility or more turbulence in Kodak shares.''

Call-option volume rose to 35,154 contracts, a 12-fold increase from the 20-day average. Each contract gives the right to buy 100 shares for a certain amount by a given date. Bullish options best outnumbered bearish ones by more than 2-to-1.

The price of the most active contracts, October $30 calls, jumped eightfold to 40 cents. Those bets will pay off if the shares reach the $30 strike by Oct. 19, when this month's options contracts expire. November $30 calls, the second-most traded options, more than doubled to $1.

To contact the reporter on this story: Allen Wan in New York at awan3@bloomberg.net. Jeff Kearns in New York at jkearns3@bloomberg.net.

Last Updated: October 12, 2007 16:45 EDT