Net Sector Rebounding, but Some Recent Big Gainers Seeing Heavy Selling - TheStreet

Internet stocks have seen some relief from early losses around midsession, though profit-takers were continuing to take their toll on some once-hot stocks.

The

Nasdaq

was up 1.36, or 0.04%, at 3769.27 in recent trading, well off the session low of 3695.35.

TheStreet.com Internet Sector

index was down 6.99, or 0.78%, at 893.09. A friendly

retail sales report was offset by a downgrade of

Hewlett-Packard

(HWP)

, creating some concern throughout the technology sector. Fed Chairman Alan Greenspan also was scheduled to speak today, and the market was starting to come back as Greenspan had not said anything to scare the markets. In addition, there may also have been some hesitation ahead of tomorrow's

Consumer Price Index report.

Any number of Internet stocks were reeling.

WebMethods

(WEBM)

continued to see profit-taking that began yesterday, trading down 12, or 8.2%, at 134 1/16. Note that the stock rallied close to 50% last week.

VeriSign

(VRSN) - Get Report

was down 12 7/16, or 7.2%, at 160 1/2 after dropping 12% yesterday.

Credit Suisse First Boston

attempted to address the losses in VeriSign in a note today. Analyst Todd Raker wrote that he had heard from investors that there was concern about the purchase accounting treatment associated with

Network Solution's

deferred revenue balance. VeriSign was recently integrated with Network Solutions.

Raker wrote that "under an obscure accounting rule, in a purchase transaction where there is deferred revenue associated with software sales and where the cost associated with that revenue has already been incurred, some of the revenue can not be carried over to the new entity. We believe that this rule dates back to 1965 and do not ask us to explain the logic; we have not been able to find any." He indicated that under a "worst case scenario," a minimum of 80% of Network Solution's deferred revenue will be carried over to VeriSign. Raker wrote that much of this information was old news because the management team has been on the road talking about this issue over the past few weeks, but he would update the situation when he learned more.

The actual reason for Raker's note was to reiterate a strong buy on VeriSign, in part based on expectations that the government will pass legislation that would validate the use of digital signatures. He wrote that passage of the bill should act as a positive catalyst for the digital certicicate market given that in most circumstances, one must use a digital certificate to create a digital signature. VeriSign provides digital certificate services for Web sites.

NBCi

(NBCI)

remained one of the big losers on the Nasdaq, down 8 5/8, or 35%, at 16 after it issued an earnings warning and a restructuring. The company blamed low advertising sales for the warning. And losses in NBCi were weighing on a couple of other stocks.

CNet

(CNET) - Get Report

, which owns about 11% of NBCi, was down 2 15/16, or 8.7%, at 31 1/8. Also appearing to feel the heat was

About.com

(BOUT) - Get Report

, which also relies on advertising dollars for its revenue; it was trading down 4 3/4, or 12.5%, at 33 1/4.

Yahoo!

(YHOO)

was down 4 3/4, or 3.5%, at 132 3/4.