SAN FRANCISCO -- The best news to come out of the stream of earnings reports from the Internet sector this month is that the dreaded summer doldrums never showed up. That, analysts say, is a strong indicator that the rest of the year should be a knockout.
As a rule, the companies regarded as the leaders of Internet commerce had positive earnings surprises for Wall Street for the third quarter, which encompasses the bulk of the summer season. Many also reported revenue and traffic figures that were well ahead of estimates. As the Internet passes puberty, analysts expect it to take on some of the characteristics of a traditional advertising economy, including a slow summer quarter.
But during the Net's short history, the summer has yet to produce the slower traffic and a corresponding slump in revenues. That means the growth rate of business on the Net is still surging ahead and nowhere near a slowdown. And that in turn means the holiday season, a busy time for portals and online retailers, could be nothing short of dazzling.
In the quarter ended Sept. 30,
reported this week a pro forma net loss of 49 cents a share excluding acquisition-related charges. Amazon's number beat analysts' expectations by 8 cents a share.
posted a net profit of 26 cents a share, beating the Street by 3 cents a share. The robust numbers extend a trend started last month, when
reported earnings of 15 cents a share, exceeding analysts' expectations by 6 cents.
The stronger-than-expected profits come amid encouraging traffic numbers. Yahoo!'s traffic grew 25% to 144 million pages a day in September.
traffic grew 15% to 50 million pages a day.
If the momentum evident in the summer season extends into the holiday season, the fourth quarter could be a corker. Last year, according to
, $1.1 billion worth of goods was sold over the Net during the holidays -- a number that analysts expect will be exceeded by a fat margin. "We will have a very, very,
big fourth quarter with respects to e-commerce," said Christopher Lord, a senior analyst at
Amerindo Investment Advisors
But the holiday shopping is somewhat still stock specific, he said, noting that Amazon.com added 1.2 million new customers in the summertime. "The winners are winning more and more," Lord said.
And the also-rans: Well, they're also running.
reported Thursday a net loss of $2.6 million, or 8 cents a share, 2 cents below expectations. And while its peers saw traffic grow in the double digits, Infoseek's traffic grew just under 5%.
And just meeting expectations isn't enough to satisfy the tough Internet crowd. Internet grocer
came right in level with expectations with a loss of 30 cents a share Thursday after the markets closed. Its stock dropped 17% Friday.
"The smaller, gremlin stocks have shown some recovery, but generally remain buried," said
BancBoston Robertson Stephens
analyst Keith Benjamin in a report Friday. "While we continue to hope to find a king-size
bar in the bag of smaller stocks, we fear more apples with razor-blades."
For more information on institutional holders, financial statements and earnings estimates for companies mentioned in this story, see the
Thomson Company Reports.