Fear and Hacking in the Net Sector

Though the outages have had little impact on individual stocks, they have caused uncertainty.
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Recent site outages have been dubbed "cyberterrorist attacks" by some in the business, but it appears as if these terrorists have had marginal material impact on the companies they've targeted so far.

Internet stocks were mostly lower, including those companies that have been hit by outages from the hackers. But it's a stretch to say that such losses resulted from traders selling on concerns about the revenue impact on these companies. Rather, uncertainty often breeds fear and fear leads to selling, particularly after the gains made in recent sessions. And the broader market has been weaker as well today.

TheStreet.com Internet Sector

index was down 15.97, or 1.4%, at 1145.76, though losses would be greater were it not for DOT component

BroadVision

(BVSN) - Get Report

, which was up 12 11/16, or 8%, at 164 15/16 after announcing a 3-for-1 split.

"We haven't been paying too much attention to it, and the market isn't freaking out," said one industry source. "Certain of these businesses are more sensitive to being down for shorter periods of time that are heavily transacted like

eBay

(EBAY) - Get Report

and

E*Trade

(EGRP)

, where time is of the essence," he said. "But two or three hours of downtime is not significant. If it keeps occurring, there will be some impact to revenues, but it needs to be to a far greater extent for it to be a concern and to impact the outlook for Q1."

The source said there also would be little damage to customer relationships because the attacks are coming from outside the companies and aren't internal problems. The problems also have been fixed relatively quickly, he said.

"I don't think there's risk to damaging customer relationships, because it's pretty well understood this is not an issue specific to these companies, but external infiltrators," he said. "But it does point out that a number of the sites are still vulnerable to huge spikes in traffic, including the biggest and the baddest and the best of them."

Among the companies that apparently have been hit today were online brokerages E*Trade and

Datek Online

, along with

ZDNet

(ZDZ)

, which operates a site that covers technology news. E*Trade was up and running after being down for at least one hour, while Datek was up after a 30-minute interruption. ZDNet was down for about 2 1/2 hours.

In recent trading, E*Trade was down 1 1/16, or 5%, at 21 15/16, while ZDNet was up 1/8, or 0.4%, at 33 1/4. ZDNet's gains likely were following its earnings report yesterday.

They join a number of other high-profile names that have been targeted by the hackers, including

Yahoo!

(YHOO)

,

Buy.com

(BUYX)

, eBay and

Amazon.com

(AMZN) - Get Report

. In recent trading, Yahoo! was down 10 5/8, or 3%, at 362 1/2. Buy.com, which went public yesterday, was up 2 3/8, or 9%, at 27 1/2. eBay was down 6 1/8, or 4%, at 163 5/8, while Amazon was down 3/4, or 1%, at 82 1/8.

A couple of companies that provide Net security appeared to be benefiting from the problems.

ISS Group

(ISSX)

was up 2 7/16, or 3%, at 76 5/16, though it traded as high as 82 13/16. And

SonicWall

(SNWL)

, which provides secure Internet access for small businesses, was up 6 7/8, or 11%, at 69 1/8. And

VeriSign

(VRSN) - Get Report

, which provides Internet security software, was up 7 1/4, or 4%, at 196 11/16. Also,

WatchGuard

(WGRD)

was up 9 5/16, or 28%, at 42 15/16.