Traders Pocket Pre-Christmas Profits in Net Sector

After a strong rally yesterday, Internet stocks falter in early trading.
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Last-minute Christmas presents must be expensive, since Internet traders looked to book some profits with just two sessions to go before the holiday.

TheStreet.com Internet Sector

index was off 27.86, or 2.4%, at 1131.21. Net stocks rallied sharply yesterday after the

Federal Reserve

left interest rates unchanged, though traders may be having second thoughts since the Fed still suggested it was on track to tighten rates further in the new year.

Among stocks in the news,

Internet Capital Group

(ICGE)

was up 9 1/4, or 5%, at 198 3/4. The stock doesn't really need much help, but got some anyway when

Goldman Sachs

initiated coverage of the stock with a market outperform rating. The rating is roughly equivalent to a buy rating at other research houses, and it is below the recommended list to which Goldman assigns its top picks.

In the note, analyst Rakesh Sood indicated Internet Capital is a core holding and a "good way to participate in B2B growth." Sood also attempted to tackle the stock's valuation. In the note, he estimated the B2B market to be at least 10 times that of the business-to-consumer market, which has an aggregate market cap of $250 billion, putting the B2B market at $2.5 trillion. He estimated that Internet Capital would command a 15% to 20% share of the market. Discounting Internet Capital's market share over time and the fact that while it helps bring companies public, it only owns approximately 32% of each new company gives a market cap in the $50 billion to $75 billion range, he wrote. Internet Capital's market cap before trading today was around $48 billion.

Commerce One

(CMRC)

, another unbelievably hot

B2B play, was seeing some profit-taking, down 15, or 4%, at 465.

TSC

columnist

Adam Lashinsky

took a look at Commerce One and the 1,000 price target one analyst placed on the stock in a

piece today.

Juno Online

(JWEB)

, which has soared the past two sessions on plans to offer low prices and free Internet access, was up again today, even though the stock was getting a little more scrutiny.

TSC

took a closer look at the stock and what its new policies mean to the bottom line in an earlier

piece. Juno was up 9 3/8, or 14%, at 76 1/8 in recent trading.

And

Internet America

(GEEK)

, which gained more than 12 points yesterday on speculation that it was also considering offering free Net service, was down 7 7/8, or 38%, at 13 1/8 after the company denied the rumor, according to

CNBC

.

Corel

(CORL)

, which has soared as a play on the

Linux

operating system, was off 5 1/16, or 27%, at 13 1/2 after issuing a

warning about fourth-quarter numbers. The Canadian software company said it would post lower fourth-quarter revenue and a loss of 14 cents a share, compared with year-ago earnings of 10 cents. The four-analyst estimate calls for earnings of 12 cents a share.

TSC's

Herb Greenberg

had some not-so-kind

words about Corel earlier this month and tackled the topic again

today.

Corel also said that it had acquired an ownership stake in

LinuxForce

, a private company that offers a full range of technical services and support for Linux. Corel acquired one-third of LinuxForce, with a three-year option to increase the ownership position to two-thirds. Terms were not disclosed.

Analysts at

First Union Securities

downwardly adjusted revenue projections for

MindSpring's

(MSPG)

fourth quarter. The Internet service provider recently announced plans to merge with

EarthLink

. Analyst Andrea Grosz now estimates revenue at $92.3 million for the fourth quarter vs. $99.2 million previously. She also dropped revenue estimates for 2000 and 2001, though the fourth quarter should be the last quarter in which MindSpring reports earnings as a separate entity.

A couple of other acquisitions were happening in the sector.

America Online

(AOL)

agreed to buy

Mapquest.com

(MQST)

for $1.1 billion in stock, though shareholders of Mapquest apparently didn't like the deal. It was down 6 1/4, or 19%, at 26 1/4. AOL was off 1/8 at 84 7/8.

Shareholders of Mapquest.com will receive 0.31558 share of AOL stock for each share of Mapquest stock they own.

TheStreet.com/NYTimes.com

joint newsroom

filed a more detailed look at the purchase.

Healtheon/WebMD

(HLTH)

said it has entered a deal to buy the

Kinetra

joint venture from

Electronic Data Systems

(EDS)

and

Eli Lilly

(LLY) - Get Report

. In addition, the companies said Lilly has decided to use Healtheon's Web content and services. Healtheon said that the alliances and the purchase of the Kinetra venture total roughly $300 million. Healtheon/WebMD was up 2 3/16, or 6.4%, at 39 3/16 on the news.