Net Sector Stumbles as Stamps.com Takes a Licking

Ahead of a lockup expiration, Stamps.com also faces the departure of three co-founders.
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While the stock market could face a quiet holiday week, plenty of news was moving Internet stocks.

Shares of

Stamps.com

(STMP) - Get Report

were off 5 7/8, or 9%, at 59 5/8. Little has been made of last week's

announcement, posted on the company's Web site, that three of its co-founders were leaving to pursue a new venture.

Jim McDermott, Jeff Green and Ari Engelberg will leave the company at the end of the year, though they will remain as consultants to Stamps.com "for an indefinite period of time," according to the announcement. Stamps.com offers purchasing and printing of postage over the Internet.

The stock is off about 20% since the release was posted Dec. 14. Unlike corporate press releases that appear on the newswires touting new partnerships, this press release didn't appear on those wires. Instead it was tucked into the press-release section of the Web site. Also, Stamps.com has 2.1 million shares coming off lockup Dec. 22 and another 6.8 million in February.

B2B plays remained hot.

E.piphany

(EPNY)

was up 12 7/8, or 6%, at 233 after news of an agreement with

AMR's

(AMR)

American Airlines

. E.piphany products will gather data providing American Airlines with insight into its online

Aadvantage

members.

Red Hat

(RHAT)

has been able to shrug off

missed earnings numbers to trade up 11 3/8, or 4.5%, at 264 1/4. Gains have likely stemmed from the company's stock-split announcement. But Red Hat also said it was considering a secondary offering of shares. No matter -- investors just seemed to care about the split.

A few streaming-media companies were also on the rise today.

InterVU

(ITVU)

, which provides audio and video delivery over the Internet, announced a partnership with

Microsoft

(MSFT) - Get Report

to expand its broadband streaming-media network based on the

Windows Media

platform. As part of the agreement, Microsoft will invest $30 million in InterVU. InterVU was up 27, or 31%, at 115 on the news, while Microsoft was down 3 3/8, or 2.9%, at 111 7/8.

The alliance may be affecting shares of

RealNetworks

(RNWK) - Get Report

, which was down 4 3/16, or 2.7%, at 148 15/16. However, RealNetworks already has already built its own streaming-media infrastructure through its

RealBroadcast Network

, so the new technology will only be bringing Microsoft up to speed with RealNetworks, not putting it ahead.

Also,

Liquid Audio

(LQID)

was up 9/16, or 1.6%, at 36 9/16 after

Dain Rauscher Wessels

initiated coverage of the stock with a buy rating and a 12-month price target of 60. Analyst Stephen Sigmond wrote that the distribution of music via the Internet "will be one of the largest future e-commerce opportunities" and that Liquid Audio "will be able to capitalize on the high rate of growth in the digital music industry, independent of format."

CNET

(CNET) - Get Report

was one of the big decliners, down 3 5/8, or 4.6%, at 75 3/8. CNET climbed 9 points Friday, apparently for no reason, and today's losses have also come amid no news on the company.

Friday's largest point

decliner on the

Nasdaq

,

Electronic Arts

(ERTS)

, was recovering today. It recently was up 2, or 2.5%, at 83 1/2 after dropping around 28 points Friday.

A number of research firms came out in defense of Electronic Arts today.

Credit Suisse First Boston

analysts wrote today that Friday's reaction was overdone and the selloff has created "an unusually compelling opportunity" for long-term investors to acquire Electronic Arts "at its new holiday season sale price." Analyst Lise Buyer wrote that though sales of cartridges for

Sony's

(SNE) - Get Report

N64 platform were soft, they account for less than 15% of the company's revenue. CS First Boston has not done underwriting for Electronic Arts.

PC Data

released a solid report on online holiday sales. The company said that online consumers spent more than $1.2 billion in the week of Dec. 6-12, an increase of more than 38% from the previous week. It was the first time Internet purchases topped the $1 billion mark. Huge increases were registered in apparel purchases, up 64.5% from the previous week, and electronics purchases, up 47%.

Amazon.com

(AMZN) - Get Report

remained a bright spot on the Net front, up 4 1/2, or 5%, at 98 9/16. Amazon founder Jeff Bezos was named

Time

magazine's Person of the Year.

E*Trade

(EGRP)

said today that the

Office of Thrift Supervision

had deemed its application for its merger with

Telebanc Financial

(TBFC)

complete, indicating that the OTS would likely approve the merger in the near future.

Salomon Smith Barney

analyst Richard Zandi wrote that assuming the merger goes through, its exchange ratio is 1.05 E*Trade shares for each Telebanc share.

E*Trade was off 1 1/8, or 3.7%, at 28 15/16, while Telebanc was up 15/16, or 3.4%, at 28 3/16.