AOL, Taking a 9% Haircut, Leads as Tech's Downhill March Resumes

Once again Net stocks are off sharply, with the TSC Internet index off 6%.
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SAN FRANCISCO -- The vultures are circling, sensing that as Net stocks get pounded yet again even the seemingly invincible America Online (AOL) is vulnerable -- and now is the time to pounce.

Today's vulture is none other than Bill Gates, and the idea is that

Microsoft

(MSFT) - Get Report

would offer low-priced, or possibly even free, Internet access to challenge AOL's dial-up service, according to

The Wall Street Journal

. The news has sent shares of AOL tumbling and was contributing to yet another selloff in the Internet sector. AOL was down 7 15/16, or 9%, at 79 1/2 in recent trading, while Microsoft was up 7/16, or 0.5%, at 85 3/8.

AOL has been pummeled over the past few weeks over concerns about its broadband strategy, subscriber growth and pricing pressures. There were rumors last week that

AT&T

(T) - Get Report

was preparing to offer lower-cost Internet

service.

TheStreet.com Internet Sector

index was off 30.10, or 6.1%, at 459.81. There were some hopes that buyers would begin to emerge today after the

Nasdaq

on Wednesday met the classic definition of a correction, with recent losses exceeding 10%. However, there were increasing concerns of traders receiving margin calls on Net stocks, something

TSC's

Eric Moskowitz examines in detail in a

story today.

Other bellwethers also continued to drop.

Amazon.com

(AMZN) - Get Report

was off 3 7/16, or 4%, at 85.

Yahoo!

(YHOO)

was down 5, or 4%, at 116.

Also among the big losers was

GoTo.com

(GOTO)

after the company posted earnings on Wednesday. It was down 6 5/8, or 22%, at 22 3/4. GoTo.com, which operates an online marketplace for consumers and advertisers, reported a 20-cent loss for its second quarter, 2 cents better than the

First Call

estimate, and an improvement over the 24-cent loss in the first quarter. But that didn't seem to matter to investors.

A seemingly never-ending stream of supply also was contributing to the recent selloff, but companies have yet to be deterred from going public. Set to debut today were

HomeStore.com

(HOMS:Nasdaq),

Interactive Pictures

(IPIX:Nasdaq) and

Internet Capital Group

(ICGE:Nasdaq). Homestore.com, which provides listings of homes for sale throughout the U.S., was expected to be the hottest IPO of the week. It was priced at $20, which was far above the $8-$10 range originally planned. Interactive Pictures, a 3D interactive photographer, was priced at $18. Internet Capital, a venture capital firm, was priced at $12.

Also, the Heard on the Street column in

The Wall Street Journal

today takes a look at prominent online brokerage analyst Bill Burnham of

Credit Suisse First Boston

. Burnham rocked online brokerages earlier this

week with a research note suggesting online trading volume could show a sequential decline in the third quarter.

The column says Burnham's record at First Boston has been mixed, pointing out that his price targets on

E*Trade

(EGRP)

and

Ameritrade

(AMTD) - Get Report

have been surpassed, but two of the initial public offerings he recommended after First Boston took the companies public -- online broker

TD Waterhouse

(TWE)

and

Pilot Network Services

(PILT)

, an Internet-security firm -- are now trading well below their IPO prices.