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
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
was preparing to offer lower-cost Internet
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
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
Eric Moskowitz examines in detail in a
Other bellwethers also continued to drop.
was off 3 7/16, or 4%, at 85.
was down 5, or 4%, at 116.
Also among the big losers was
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
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
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
have been surpassed, but two of the initial public offerings he recommended after First Boston took the companies public -- online broker
Pilot Network Services
, an Internet-security firm -- are now trading well below their IPO prices.