AOL Gets a Clear Message From Investors as Stock Drops

The Net sector has been steadily heading downward, but one IPO is bucking the trend.
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SAN FRANCISCO -- Internet stocks remained weak through midsession and pushed to session lows as the day progressed.

TheStreet.com Internet Sector

index was recently trading down 20.95, or 3.5%, at 570.90. The index made a session high of 582.92 less than an hour into the session, but has fallen steadily since then.

America Online

(AOL)

continued to be one of the weaker Net plays after this weekend's news that it was attempting to block

Microsoft

(MSFT) - Get Report

and

Yahoo!

(YHOO)

, among other Net companies, from access to its instant-messaging market.

TSC's

Jim Seymour explores the situation in a

piece today.

AOL was recently down 6 3/8, or 6%, at 101 9/16. Microsoft was off 1 9/16, or 1.7%, at 88 11/16, and Yahoo! was down 7 7/8, or 5%, at 137 7/8.

eBay

(EBAY) - Get Report

was off 1 13/16, or 1.7%, at 106, though losses have been limited ahead of its earnings report after the close today. eBay is expected to report earnings of 3 cents a share, according to

First Call

, vs. a 2-cent gain in the year-ago quarter and a 5-cent gain in the first quarter of this year.

Goldman Sachs

analysts expect eBay's revenue to beat its revised estimate of $36.5 million, perhaps in the area of the high-$30 millions. Back in June, the company said its revenue would be $3 million to $5 million lower in the quarter due to refunds following widely publicized technical

problems that shut down its site for about 22 hours.

In a note today, Goldman analysts wrote that they expect the focus of tonight's earnings call and eBay's Aug. 9 analysts' day will be addressing the recent outages and outlining the company's progress toward improving overall site reliability. They said eBay's stock "is close to a turning point with momentum continuing to build" through the second half of the year, and that they expect rapid rollout of regional auctions through year-end once management is comfortable with the progress of its Los Angeles regional auction site. It also is expected to have a backup Web site up and running soon.

Trying to Find Solutions

Network Solutions

(NSOL)

was trading lower as the company introduced its dot-com directory. Its shares were down 1 3/4, or 2%, at 71 1/2.

A story in

The New York Times

today noted that the introduction of the online yellow pages comes amid ongoing concerns that the data on which it is based is public property. Last week, the

Commerce Department's

general counsel, Andrew Pincus, sent a 28-page letter to Network Solutions requesting that it open the data to competing companies. But in a congressional hearing last week, Network Solutions Chief Executive Jim Rutt claimed that his company owned the rights to the intellectual property.

"Nothing in the Cooperative Agreement nor in existing law gives N.S.I. the right to this information, which N.S.I. obtained in the course of providing registry and registrar services -- on an exclusive basis -- under the authority of the United States Government," wrote Pincus. The launch of the dot-com directory may add fuel to the

Justice Department's

investigation of whether the company engaged in anticompetitive behavior. Network Solutions has been pushing the directory on the Street for months as future source of new revenue. As of today, the directory, called NetNames, will offer listings and information on 1.8 million businesses. It can be reached at www.dotcomdirectory.com.

-- Spencer E. Ante

IPO Watch

Yet another Internet IPO made a successful debut, though overall weakness in the sector has tempered some of the enthusiasm for the latest issue.

Freeserve

(FREEV:Nasdaq ADR), the largest Internet service

provider in the U.K., was up 9 15/16, or 42%, at 33 5/9 in recent trading.

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