Net Sector Drops as It Struggles to Focus on the Positive

The Internet sector was attempting to focus more on a stellar earnings report from America Online (AOL) rather than IBM's (IBM) woes following its earnings warning.

The Market: Join the discussion on TSC Message Boards. TheStreet.com Internet Sector index was down 12.31, or 1.7%, at 697.21 in recent trading after reaching a low of 688.01. AOL had come back from a low of 117 to trade up 1 1/2, or 1.3%, at 119 1/2. IBM was recently down 15, or 14%, at 92.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 12.31 -1.7% 697.21 TSC E-Commerce 2.79 -2.7% 99.90 TSC E-Finance 15/8 -2.9% 54 7/8 Nasdaq 45.00 -1.6% 2743.10

Market analysts were universally positive in their praise of AOL, which reported earnings of 15 cents a share for its fiscal first quarter, besting Street estimates by 2 cents and matching the whisper number. Strength was seen throughout the report, with strong member growth, strong usage and strong advertising and commerce revenue. In addition, AOL said it had entered into a deal with Gateway (GTW) to jointly offer Internet service to Gateway PC buyers.

Robertson Stephens analyst Michael Graham wrote in a note that he believed AOL could move back to its previous highs by the end of January 2000 with strong ad/commerce revenue growth in the December quarter. He reiterated a strong buy rating on the stock.

In other news regarding AOL, The San Francisco Chronicle reported today that gay groups were accusing the Internet service of prejudice. The article indicated that AOL censors the way gay members describe themselves online, while ignoring gay-bashing remarks from other members.

News of an allegiance with AOL also was helping Stamps.com (STMP). The stock was up 3 3/8, or 9.5%, at 39 after it said it had become the exclusive provider of online postage on AOL.

Also, a number of other companies were moving after reporting earnings, though the market weakness was keeping them under pressure as well.

Beyond.com (BYND), which reported a loss of 71 cents a share vs. the 75-cent loss estimate, was down 5/16, or 2.5%, at 12 7/16. And uBid (UBID), which reported a loss of 50 cents vs. a 53-cent loss estimate, was down 1 13/16, or 5%, at 34 5/8. MP3.com (MPPP), which reported a loss of 33 cents, a penny better than expectations, was up 2 1/8, or 6%, at 39.

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