COLONIE -- Shares of Mechanical Technology Inc. of Colonie surged Friday, a day after an analyst report suggested the company may be close to announcing a new military customer for its fuel cell technology.

Mechanical Technology (Nasdaq: MKTY) makes high precision test and measurement instruments. But its MTI MicroFuel Cells subsidiary is also developing a small fuel cell that it hopes will eventually be widely adopted by consumer electronics companies and the military.

On Thursday, Citigroup Global Markets analyst David Smith said he is expecting "a new announcement on a military milestone within the coming week."

That same day, nearly 4 million shares of the company's stock traded hands, sending the stock down to $1.30 a share by the end of the day's trading from the previous close of $1.43. As a comparison, the average daily trading volume over the past three months was about 225,000 shares.

On Friday, volume was also unusually high, with nearly 2 million shares trading hands. And the stock soared more than 40 percent, ending Friday's trading at $1.86.

That's still near the lower end of its 52-week range. It's been as low as $1.27, and as high as $5.00.

A Mechanical Technology spokeswoman did not return a call seeking comment, and the Yahoo message board for the company's stock was abuzz with speculation.

Walter Nasdeo, an analyst for Ardour Capital Investments LLC in New York City, said he hasn't seen anything unusual with Mechanical Technology's stock. He has a "hold" rating on the stock with a $2 price target.

"People may have just been looking at this as an opportunity to buy because the price is so low," Nasdeo said.

Energy industry experts have said that companies like Mechanical Technology that are developing fuel cells may benefit from frustration on Wall Street with the performance of traditional batteries used in electronic devices.

Some laptop computer companies have had to recall lithium-ion batteries made by Sony Corp., the latest being Toshiba. Dell Inc. and IBM Corp. have also had recalls, and Dell also expanded its recall.

MTI MicroFuel is developing fuel cell technology that is powered by methanol. The company believes its fuel cell will be lighter and longer-lasting than batteries, and doesn't require electricity to be recharged. MTI MicroFuel said last week its new Mobion fuel cell prototype has a higher energy density than the average lithium-ion battery.

Smith, the Citigroup analyst, has the stock rated as a "buy" with a $7 price target.