Internet Stocks Backpedaling on Cisco Earnings Rumors and Inktomi's Downgrade

For much of the day, there were two big stories in Net land: Inktomi's (INKT) slide following a downgrade by Merrill Lynch, and the amazing debut of Sycamore Networks (SCMR).

Add rumors of a revenue shortfall from Cisco Systems (CSCO) late in the day, and the Net sector was backpedaling as the week ended.

TheStreet.com Internet Sector index closed down, though it was in the plus column until the last 15 minutes of trading. Losses in Inktomi kept the DOT from posting a gain. The search and network technology company closed down 17 7/16, or 14.5%, to 103 1/16 after influential Merrill analyst Henry Blodget downgraded his intermediate-term rating on the stock to neutral from accumulate, though it maintained a long-term buy rating.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 2.85 -0.4% 716.11 TSC E-Commerce 0.69 -0.7% 100.69 TSC E-Finance 2 9/32 +4.1% 58 1/16 Nasdaq 14.57 +0.5% 2816.52

Blodget downgraded the stock due to valuation concerns and expectations for "a significant increase" in operating loss estimates for fiscal year 2000. Despite other analysts coming to Inktomi's defense and an appearance by Inktomi Chairman and CEO David Peterschmidt on CNBC, Inktomi closed near session lows of 101.

Sycamore Networks was not satisfied with making a splash in the market in its first day of trading, so it created a tsunami. The company took advantage of an infatuation the market has had with networking equipment companies, closing up 146 3/4, or 386%, at 184 3/4. Its high price of 270 7/8 was a 612% rise.

Cisco closed down 2 5/8, or 4%, at 66 9/16 after trading as high as 70 15/16. CNBC reported that there were rumors that the company would not meet earnings estimates and could even pre-announce. Mary Thurber, head of investor relations for Cisco, told TheStreet.com that the company does not chat about rumors and that the date of the company's earnings announcement remains Nov. 9. Cisco is expected to report earnings of 23 cents a share, according to First Call/Thomson Financial.

Elsewhere in the Internet sector, profit-taking was a common theme, particularly among stocks that had run up in advance of earnings. Phone.com (PHCM) closed down 19 5/16, or 8%, at 229 1/4 despite besting earnings estimates Thursday. It had gained around 50 points this week ahead of its report and had already announced a stock split on Monday.

Also, CNet (CNET) closed down 6 3/16, or 11.6%, at 47 3/8 despite beating earnings estimates by a penny.

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