Combine a haircut and a shortcut, and what do you get? An Internet incubator, of course.

In a hair-raising example of investors' fascination with business-to-business e-commerce plays, shares in a former hair-salon operator now known as

Yellowave

recently have broken out of a years-long slump. The shares have more than tripled in the last month, and they've risen from mere pennies in the last year to trade at 16 and change Thursday.

What's the appeal? It's Yellowave, a B2B telecom equipment incubator that just a few months ago was known as

Cutco Industries

, a Long Island hair-salon franchise. The company underwent a stark transformation when Ron Oren, its chairman, bought Cutco, sold its beauty parlors and channeled the $3.6 million in proceeds into a new, increasingly lucrative identity.

Why buy a hair salon if you want to incubate?

"I took the shortcut," says Oren, a former stock broker with

Dean Witter

and most recently a principal with Israeli communications firm

CMR Communications

. He means that buying a publicly traded shell company, such as Cutco, meant he could more quickly realize his incubation vision. "It was easier and cheaper, and I have way more control in a far shorter time."

Quite a Ride
Shares' fortunes change following a name change

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Yellowave is just one in a string of corporate makeovers in the rush to stake a claim in the latest hot sector. Last month, for instance, a Burlingame, Calif.-based investment firm by the name of

Black Stallion Management

changed its name to

Digital Bridge

(DBGI)

. It now focuses on e-commerce consulting, online gambling and the development of a gourmet food portal.

E-commerce analyst Michael Hughes with

J.C. Bradford & Co.

says there's no shortage of companies entering what has become this most popular sector for investment. "I can tell you everyone and their brother is starting up an incubator," says Hughes. "We just had two start up here in Nashville."

Internet incubators such as

Internet Capital Group

(ICGE)

, with its $31 billion market cap and stakes in hot, growing Net firms, set the pace in the ever-growing sector. But, warns Hughes, "individual investors need to be cautious when making bets simply on a press release that says these companies are refocusing their efforts on B2B Internet."

Indeed, these rebirths are often showcased in a press release that states in no uncertain terms a full shift in focus to e-commerce, business-to-business development or some sort of Internet incubator. In the case of Yellowave, the company's release said: "We are fashioning an up-to-the-minute identity, in recognition of the profound changes and opportunities that the wave of electronic commerce offers us."

HairNet, anyone?