In its first direct acknowledgement of the growing importance of the Internet,

Standard & Poor's

announced that

America Online

(AOL)

will be added to the

S&P 500

index, replacing

Venator

(Z) - Get Report

. The change takes effect after the close of trading on Dec. 31.

In the most active trading on the

New York Stock Exchange

today, AOL shares climbed 4.9% to a new all-time high of 122 3/4. With nearly $700 billion of funds designed to directly mirror the S&P 500 index, another burst of buying power was brought to bear; in composite trading, AOL shares rose to 138.

The decision ends months of speculation about when (and whether) AOL would be added to the index. With a market capitalization over $56 billion, based on today's New York session closing price, America Online had clearly become too large for the

S&P MidCap 400

index, where the mean market cap is about $2.2 billion. (

TheStreet.com

reviewed this issue, and AOL's prospects for inclusion, in a recent

story.)

Some index watchers were perplexed by S&P's decision to replace Venator in the index, given the high number of constituents in the S&P 500 due to come out of the index because of pending mergers. But the falling market capitalization of the firm formerly known as

Woolworth's

apparently played a role in the decision to oust Venator, S&P officials said.

"Venator is ranked number 484 in market cap so that certainly was part of it," said Elliott Shurgin, vice president of index services at S&P. "Whether or not there are other issues or issues pending, I don't know."

Venator shares closed down 3/16 at 6 13/16 today, leaving the retailer with a market capitalization of just over $923 million. The mean market cap of components of the S&P 500 is $18.7 billion, according to S&P's

Web site.

As far as adding AOL to the venerable index, "there is no compelling reason now vs. any other time," Shurgin said. "Any number of companies are considered to be viable companies for inclusion -- some get added, some don't. It wasn't a matter of speculation or because it's gotten so big. Why now as opposed to six weeks ago, I couldn't really tell you."

--

Aaron L. Task

Among the other changes to S&P indices announced tonight:

  • Concord EFS (CEFT) will replace AOL in the S&P MidCap 400 index.
  • Legato Systems (LGTO) will replace Corrections Corp. of America (CCA) in the S&P 400. Prison Realty Trust (PZN) - Get Report is acquiring the company.
  • Apollo Group (APOL) will replace CalMat (CZM) in the S&P 400. S&P 400 component Vulcan Materials (VMC) - Get Report is acquiring the company in a cash tender offer.
  • Gulfstream Aerospace (GAC) will replace U.S. Office Products (OFIS) in the S&P 400.
  • Convergys (CVG) will replace Medaphis (MEDA) in the S&P 400. S&P 400 component Cincinnati Bell (CSN) is spinning off its remaining 90% stake in Convergys.
  • Everest Reinsurance Holdings (RE) - Get Report will replace Crestar Financial (CF) - Get Report in the S&P 400. S&P 500 component SunTrust Banks (STI) - Get Report is acquiring the company.
  • Furniture Brands International (FBN) will replace NovaCare (NOV) - Get Report in the S&P 400.
  • Plantronics (PLT) - Get Report will replace Grand Casinos (GND) in the S&P SmallCap 600 index. Grand Casinos is merging with the casino operations of S&P 500 component Hilton Hotels (HLT) - Get Report.
  • Priority Healthcare (PHCC) , spun off from S&P 600 component Bindley Western Industries (BDY) , will replace Wiser Oil (WZR) in the S&P 600.
  • Michael Foods (MIKL) will replace Shoney's (SHN) in the S&P 600.

3Com

(COMS)

reported second-quarter earnings of 36 cents a share, a nickel ahead of the 27-analyst

First Call

forecast and above the year-ago penny.

In other postclose news (earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified):

Earnings/revenue reports and previews

Arrow International

(ARRO)

announced first-quarter earnings of 44 cents a share, in line with both the six-analyst view and the year-ago figure.

BancorpSouth

(BXS) - Get Report

expects to incur merger-related charges of about $3.7 million in the fourth quarter.

Burlington Coat Factory

(BCF)

posted second-quarter earnings of 64 cents a share, on target with the six-analyst estimate but behind the year-ago 84 cents.

Cyberian Outpost

(COOL)

recorded a third-quarter loss of 34 cents a share, narrower than the three-analyst prediction for a loss of 39 cents but wider than the year-ago loss of 12 cents.

Dura Pharmaceuticals

(DURA) - Get Report

said it will meet fourth-quarter earnings estimates pending the completion of a private equity placement to secure independent financing with

DJ Pharma

. The 15-analyst view calls for earnings of 16 cents a share vs. the year-ago 37 cents. Dura expects to take a charge of 8 cents to 12 cents a share if the financing is not completed by the end of the year.

Inacom

(ICO)

warned it sees fourth-quarter earnings coming in at 50 cents to 55 cents a share because continued softness in indirect reseller operations have led to below-target sales levels. The 10-analyst forecast called for 71 cents vs. the year-ago 64 cents.

Ingram Micro

(IM)

sees fourth-quarter earnings of 48 cents to 50 cents a share because of slower-than-expected PC sales. The 12-analyst estimate called for 56 cents vs. the year-ago 47 cents. The stock fell 9 1/4 to 37 in after-hours trading.

Manugistics

(MANU) - Get Report

reported a third-quarter loss of 37 cents a share, missing the 11-analyst outlook for a loss of 6 cents and falling below the year-ago profit of 14 cents. The company said it was in talks with potential business partners about a combination.

Reebok

(RBK)

announced charges that will reduce fourth-quarter net earnings by about $10 million, or 18 cents a share. The charges are for an adjustment to the carrying value of its Brazilian joint venture, severance expenses from restructuring and the bankruptcy of one of the company's independent distributors.

Transaction Network Services

(TNSI)

warned that its fourth-quarter earnings will fall to 10 cents a share because of delays and costs related to migrating

AT&T

(T) - Get Report

traffic to its network. The three-analyst estimate called for 31 cents vs. the year-ago 20 cents.

Mergers, acquisitions and joint ventures

MagneTek

(MAG) - Get Report

agreed to sell its generator business to

Emerson Electric

(EMR) - Get Report

for $115 million. MagneTek also announced the hiring of

Goldman Sachs

to help it evaluate strategic options to boost shareholder value. The company expects second-quarter earnings to fall 10 cents to 15 cents a share below estimates because of declining generator sales, postponed power supply deliveries and inventory adjustments. The six-analyst forecast called for 23 cents.

Offerings and stock actions

Equant

(ENT) - Get Report

said it's considering an unspecified secondary offering in early 1999.

Oracle

(ORCL) - Get Report

said plans for an IPO of its Tokyo-based subsidiary,

Oracle Corporation Japan

, were approved by Japanese regulators.

Pep Boys

(PBY) - Get Report

said it will make a Dutch auction tender offer for up to 10 million of its shares for between $13.50 and $16 each.

Ziff Davis

(ZD)

filed with regulators for an IPO of a new series of stock for

ZDNet

, the company's Internet business division.

Miscellany

The

New York Stock Exchange

reached an agreement with state and city officials to remain in lower Manhattan and build a new trading floor across the street from its landmark headquarters. Exchange executives were considering a move to New Jersey. City Hall officials said the deal was worth around $600 million.

W.R. Grace

(GRA) - Get Report

said allegations of fraud made by the

Securities and Exchange Commission

are false and that the company doesn't expect litigation to have a material impact on earnings.

A group of investors led by financier Carl Icahn said they took the first step toward reopening their battle to break up

RJR Nabisco

(RN)

into separate food and tobacco businesses. The group said it owns 5.4% of the company and might mount a proxy fight if the Nabisco arm was not sold off before the next annual shareholders meeting. RJR Nabisco said it's working toward separating the businesses.