Investors continued to punish technology and Internet issues early today, but were especially hard on a couple of companies that made acquisitions.

TheStreet.com Internet Sector

index was down 41.44, or 5.0%, to 782.66 in recent trading. The

Nasdaq

was off 176.00, or 5.2%, to 3214.40.

Vignette

(VIGN)

was down 8 15/16, or 20%, to 34 7/8 on news that it would acquire

OnDisplay

(ONDS)

in a stock deal valued at $1.7 billion.

Vignette will issue 1.58 shares of its stock for each outstanding share of OnDisplay, which develops and markets applications for powering e-business portals and e-marketplaces in both business-to-business and business-to-consumer e-commerce. OnDisplay was down 3/4, or 1.4%, to 52 1/2, though it had traded as high as 57 7/8.

And

webMethods

(WEBM)

, which provides business-to-business services for e-commerce, said it will acquire

Active Software

(ASWX)

,an e-business infrastructure software maker, in a stock deal valued at $1.3 billion. Active shareholders will receive 0.527 share of webMethods. WebMethods was down 20 3/4, or 24%, to 66 1/4, while Active was down 3 1/8, or 9.4%, to 29 7/8 after trading as high as 38 1/8.

And there were also the requisite research reports plugging a number of Internet stocks.

ING Barings

reiterated a strong buy rating on

Exodus Communications

(EXDS)

and a buy rating on

America Online

(AOL)

.

Exodus was down 2 3/16, or 3%, to 69. ING analyst Youssef Squali wrote that while sequential revenue growth in the company was declining to the 25% to 30% range, he thought there was much upside in the stock at its current valuation and with the stock 60% off its 52-week high. But most interestingly, Squli suggests that Exodus is a potential buyout candidate, noting that

Verio

(VRIO)

was recently acquired by

NTT Communications

.

"While Exodus would be a big-ticket item since the company boasts a current market capitalization of approximately $19 billion (on a fully diluted basis), we believe that it would be a strategic asset to many global telecommunications companies that have yet to enter the high-growth Web hosting and co-location market," he wrote. Among the list of potential acquirers, he wrote, were

MCI

,

Sprint

(FON)

,

Level 3

,

IBM

(IBM) - Get Report

and

Intel

(INTC) - Get Report

AOL was down 1 5/16, or 3%, to 52 1/16. Squali wrote that AOL was on track to meet or exceed his estimates for the June quarter, with revenues of $1.95 billion, earnings per share of 12 cents and subscriber growth of 793,000. He wrote that he did not anticipate

Terra Networks

(TRRA)

acquisition of

Lycos

(LCOS)

to have much of an impact on AOL's competitive position domestically, though it could "spur AOL into making acquisitions in Europe and/or Latin America to strengthen its franchise outside the U.S."

Goldman Sachs

put out a mostly positive note on

CMGI

(CMGI)

. It was down 2 1/4, or 4%, to 50 7/8. Analyst Vik Mehta wrote he expected CMGI to "comfortably" meet revenue estimates of $200 million for the current quarter. He wrote that he did not expect CMGI's

AltaVista

IPO to come until the fall. While the company will report quarterly numbers on June 13, he did not expect any near-term stock catalysts in the coming weeks.

"The recent decline in market valuations has negatively impacted CMGI in the short-term by making it difficult for the company to realize value through liquidity events. However, this has also opened up a range of other alternatives as valuations in the private markets have corrected 10% to 50%," he wrote. "In today's market CMGI is much more likely to find good companies with attractive valuations than a few months ago."

Online brokerages were mostly lower on news of a sharp drop in trading volumes during the month.

Credit Suisse First Boston

analyst Jim Marks wrote that trading volumes for Internet stocks were down 34% from April, while Nasdaq volumes were down 25% from the first quarter. But Marks questioned whether the news would have much impact.

"Impact on online brokerages may be surprisingly muted," he wrote. "The online brokerage stocks did not soar when volumes soared last fall. They did not react to great earnings this spring. Since they did not go up on growing volumes, could they prove more resilient on the downside as it becomes widely apparent that volumes are declining sharply?"

Among online brokerages,

E*Trade

(EGRP)

was down 2 1/2, or 13% to 16 7/8, while

Ameritrade

(AMTD) - Get Report

was down 1, or 7%, to 12 3/4.

Schwab

(SCH)

was off 1 1/16, or 4%, to 40 3/16.