eBay's (EBAY) - Get Report results dragged the Internet sector lower today, and while early signs do not suggest Amazon.com's (AMZN) - Get Report numbers will be strong enough to rally the Net sector on Thursday, they shouldn't hurt it.
After today's close, Amazon reported a loss of 26 cents a share, 2 cents better than the 28-cent loss estimate from
First Call/Thomson Financial
. Revenue of $356 million was above the $345 million estimate from
, though in a note in advance of the report, Merrill analyst Henry Blodget wrote that upside of $10 million to $15 million in revenue was possible. The company added 2.4 million customer accounts, for a total of 13.1 million, above the 12.8 million estimate that Merrill was looking for.
Amazon said repeat customers accounted for more than 72% of orders. It also said fourth-quarter revenue should be greater than the third quarter, but gross margins would be lower.
Ahead of its report, Amazon closed down 5 5/16, or 6.5%, at 75 15/16, and was at 75, down 7/8 in after-hours Island ECN trading.
Day-session weakness reflected concern about eBay. The online auctioneer closed down 13 5/16, or 8.8%, at 138 11/16 after it reported earnings last night that disappointed the Street. eBay's earnings of 2 cents a share for its third quarter were above the 1-cent estimate from First Call, though the profit was helped by an increase in interest income. In addition, gross margins of 71% were down from 78% in the second quarter.
Though most analysts indicated that eBay had a solid quarter,
Deutsche Banc Alex. Brown
downgraded the stock to market perform from buy, saying that it did not command the valuation similar to other Net leaders like Amazon.com,
, which have "near-perfect business fundamentals and flawless execution." What is more surprising about the downgrade is that it was made by a house that has done underwriting for eBay. And earlier this
month, Deutsche Banc actually upped its price target on eBay to 175 from 150 ahead of what it expected to be a solid earnings report.
AOL was one of the lone Net bellwethers to close higher, finishing up 2 7/8, or 2%, at 119 5/8. The company is expected to hold its annual stockholders meeting on Thursday. The stock likely popped in anticipation of likely approval for increasing the number of AOL's authorized shares -- a vote which makes it easier (but doesn't guarantee) for AOL to split its shares.
Not all the earnings news was bad. Shares of
closed up 37 7/8, or 38%, at 137 after the company posted an 11-cent profit vs. expectations of a 5-cent loss. F5 provides Internet management products.
Exodus Rises on Acquisition News
In its largest acquisition to date, Web hosting company
scooped up Internet performance measurement company
for $280 million. The acquisition, expected to close by Dec. 2, is an all-stock deal and will be accounted for as a pooling-of-interest transaction.
Investors cheered news of the acquisition. After trading as low as 74 1/4 before the announcement, Exodus closed at 77 1/4, up 1/8 for the day.
The acquisition continues Exodus's strategy of providing more complex Web hosting services to its customers. When it first started out, Exodus focused on co-locating servers of companies doing business on the Internet. Essentially, Exodus would house the servers and hook them up to the Internet.
But as bandwidth has become commoditized, Exodus realized the need to generate more of its revenue from value-added services such as content caching, security and network monitoring. Today's acquisition is designed to beef up Exodus's monitoring capabilities.
Based in Boulder, Colo., Service Metrics is a privately held company that has set up a network of 120 computers that monitor the performance of Web sites. The service compiles data by automatically visiting customer Web sites several times each hour from locations across the United States and around the world. The company, founded in June 1998 and funded by
Softbank Technology Ventures
and several other VCs, claims to have 45 customers.
The deal is not likely to boost Exodus' bottom line in the near term. Dick Stolz, Exodus CFO, expects Service Metrics to add $15 million in revenue during 2000. He said it will be dilutive for the first three quarters and additive beginning the fourth. Stolz said the company's annualized revenue run rate is $2.5 million, but is "ramping nicely." Exodus, which currently has around 82 million shares outstanding, will issue 3.1 million to 4.2 million shares of its stock to pay for the transaction.
-- Spencer Ante