Profitability Now Matters for Net-Stock Investors

SAN FRANCISCO -- Just when loss-producing Internet stocks have fallen from favor, a new crop of Internet companies are emerging as profitable enterprises.

Only a few months ago, investors viewed profits at Net start-ups as a curse. Except for a handful that earned profits early on -- America Online (AOL Quote), Yahoo! (YHOO Quote) and eBay (EBAY Quote)) -- the mantra of Internet start-ups was simple: Spend, spend, spend. To build brand. To grow market share. And to acquire customers before they became too expensive to pry from competitors. It was all about, in the euphemistic patter of Wall Street, investing in the future.

Well, the future is arriving more quickly than most folks realized. As interest rates rise and Net IPOs flood the market, Net stocks are getting slapped upside the head. TheStreet.com Internet Sector index is down 25% since April 23, when the Internet carnage was just starting to get under way. And Amazon.com (AMZN Quote), which came to exemplify the spend-today, rule-tomorrow philosophy, is down 56% in the same period. ...