Enron

(ENE)

, in case you haven't heard, is an Internet company now.

Oh sure, the Houston-based company still gets nearly all of its revenue ($40 billion in 1999) from operations related to natural gas and other energy businesses. But its stock is up far more than other energy companies -- 75% since late last year, from around 40 to the low 70s. That's when Enron really started talking up its home-grown efforts in online trading and broadband Internet services.

Not only has Enron convinced the Street that it's an Internet play, it's done something even more remarkable: It has taken on the Internet identity and, in a market where most business-to-business Internet stocks have been trounced, Enron has continued to rise. Content-delivery upstart

Akamai

(AKAM) - Get Report

, for example, a competitor to one major line Enron is establishing, is down 66% since Jan. 20, when Enron met with its analysts.

Competitor

Digital Island's

(ISLD)

shares have plunged 68%. And the value of Web-hosting leader

Exodus Communications

(EXDS)

is off 43%. Similarly, shares of

CommerceOne

(CMRC)

-- the most generous proxy for whatever value Enron is creating with its already active electronic marketplace for power-industry goods,

EnronOnline

-- are off 41%.

Part of the gain is because Enron's main business is solid, and Wall Street cheered first-quarter results. But that accounts for the incremental gain, not the maintenance of the Internet valuation. In short, the company has sold a convincing line to gullible energy-industry analysts. The spiel, which has already become pass

with Internet analysts who have heard it all too often, has a simple premise: New online endeavors with no foreseeable payoff justify an immediate and dramatic expansion of a company's stock value. This line is working for Enron, it seems, because the analysts who follow the stock are, they admit, suddenly in unfamiliar territory.

"What do we know?" asks one sell-side analyst who attended the January meeting but requested anonymity because a colleague now covers Enron. "The audience was a bunch of natural gas and power analysts" who were awed by the appearance onstage of Scott McNealy, CEO of new Enron partner

Sun Microsystems

(SUNW) - Get Report

.

Even unabashed Enron bulls are straightforward about their limited abilities to value the new businesses, which have helped boost Enron's market capitalization by $22 billion.

"I'm not sure I can value EnronOnline right now," says Donato Eassey, a natural-gas analyst with Merrill Lynch in suburban Washington, D.C. "I need a little more history than one quarter." (Merrill hasn't acted recently as an investment banker for Enron.)

EnronOnline clearly is successful, at least in the sense that Internet companies measure success. Since its inception at the end of November, the company has completed 85,000 transactions, from shipments of gas to weather derivatives with a notional value of $32 billion. But as these are products Enron would have bought and sold anyway, the company is mum on any incremental revenue it collected as a result of what it terms the free exchange.

And, rivals say, the analysts are overlooking their own e-commerce efforts when valuing their shares. Earlier this month, six energy-industry players unveiled the

Energy Trading Consortium

, designed in part to deny Enron a lock on the business.

Nevertheless, Merrill's Eassey is enthusiastic about Enron, because, as he points out, "It's not a bottomless pit. You have this base book of energy earnings." Indeed, this is one reason investors appear to love Enron. Beneath its grand Internet plans is a savvy company that pioneered making markets in different kinds of power commodities. And its core business is healthy. The company had 1999 earnings of $957 million, or $1.18 per share. That's probably more net earnings than have been generated by the top 200 dot-coms combined.

Eassey values Enron's non-Internet business at about $52 per share, or $38 billion. At its meeting in January, the company suggested that its new businesses eventually could generate enough revenue to be worth $37 per share, or an additional $27 billion in market cap. And it has dangled the prospect of an initial public offering if Wall Street fails to fully value the Internet side of the business, a lure certain to get the attention of analysts eager to win investment-banking business for their firms.

For its part, Enron's top Internet executive enthusiastically suggests Wall Street hasn't awarded it enough value for what it plans to accomplish. "Enron's approach is fundamentally different than traditional energy peers and traditional telecommunications peers," says Joe Hirko, CEO of

Enron Broadband Services

in Portland, Ore. Among the company's activities is providing a market to buy and sell broadband access, as well as content-delivery services such as hosting a streaming-video presentation for a corporate client.

He also says that Enron has an advantage over firms like Akamai because Enron owns its own network. "I don't see anybody approaching the breadth of Enron," says Hirko. "I just see a number of potential competitors in each individual space."

Still, straight-talking energy analysts acknowledge the difficulty in placing value on Enron's grand plans, which include spending $650 million in 2000 alone adding tens of thousands of miles of fiber-optic cable and thousands of servers to its content-delivery systems.

"We suspect that most of the attendees at today's conference, like ourselves, are being asked to venture fairly far afield from their home turf (natural gas, power, energy) to understand and value the broadband business," wrote analyst Hugh Holman after the meeting in a report for his former employer,

Robertson Stephens

. "It's not that we don't get it, or aren't excited by the prospects laid out for us; rather, it's that we have no highly tuned critical filter to apply, to assess the strengths, weaknesses, and likelihood of success of Enron's strategy."

Now the question is, How long before the rest of Wall Street figures out that Enron's future is only as rosy as the outlook for its new Internet brethren?

As originally published, this story contained an error. Please see

Corrections and Clarifications.

Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.