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At Amazon, Deep Discounts Take 5% Off Stock

The online bookseller's discount plan for bestsellers hasn't pleased investors so far. Plus, CNet defies the negative tech trend.

SAN FRANCISCO -- The question continues to pop up: Are Internet stocks due for a correction? And, if so, will it be longstanding?

The pattern of recent has been for the sector to correct following first-quarter earnings reports, which, for the most part, have now concluded. But there's also been a tendency for buyers to step in on any setback, which often limits the effect of any potential correction.

This time, there's a wild card as well: higher interest rates, which are the last thing you want too see if you're a company that is trying to grow into a sky-high valuation.

Net-sector analysts lately appear to be divided on the correction issue. In his weekly Web report on Friday,

BancBoston Robertson Stephens

analyst Keith Benjamin said he sees Internet stocks taking a 25% hit after this week's two big events --



earnings report on Tuesday and

America Online's


meeting with investors on Wednesday.

Donaldson Lufkin & Jenrette

analyst Jamie Kiggen has taken the other side of the argument. In a research note on AOL released this morning, Kiggen wrote that "tremendous seasonal strength in the second half of the year should really jump-start the sector, but don't wait too long to own them for the obvious (but undoubtedly major) catalyst."

Today, though, the Internet mood has been decidedly sour, and the only catalyst seems to be the prospect of higher interest rates, especially with the


meeting on Tuesday.

And while the Net sector has been seeing losses across the board in today's session,

(AMZN) - Get, Inc. Report

has received a singularly hard drubbing, plunging 7 1/2, or 5.6%, to 124 7/8. The company said it would begin selling books from

The New York Times

bestseller list at a 50% discount, and that may be adding to fears about when it will be profitable, concerns that were

TheStreet Recommends

rekindled following its most recent earnings report.

In a note penned earlier today,

Credit Suisse First Boston

downplayed fears that the move will cut into Amazon's revenue. CSFB estimated that sales of bestseller titles "account for no more than 2% to 3%" of Amazon's sales, and the firm made no change to its revenue estimates for the company. CSFB wrote it suspects that "this move is a warning shot across the bow of new price-based competitors (like

) that Amazon can and will play hardball."

In the same note, CSFB said that Internet stocks will "remain volatile and particularly risky" for those seeking short-term gains. Investors with a long-term horizon (of greater than 12 months) "should use these periods of weakness to accumulate shares of Amazon," the firm said.


(CNET) - Get ChinaNet Online Holdings, Inc. Report

has defied the downward trend plaguing the tech sector today, likely benefiting from news that its


division, which is co-owned by


, has entered into an agreement with


(RNWK) - Get RealNetworks, Inc. Report

to make Snap! the exclusive search feature on the RealNetworks RealPlayer G2.

CNet was up 2 5/16, or 2%, at 118 9/16. RealNetworks was trading down 6 3/8, or 7%, at 82 5/16, but that may be in reaction to earlier news that the company has filed to offer 4 million shares of stock.

Internet stocks?

Interest rates rising -- get out.

Interest rates, schminterest rates -- buy.

Waiting for a correction.

June quarter will be strong -- get in.