SAN FRANCISCO -- Internet portals were the story in the Internet sector today. News that Disney (DIS) - Get Report was expanding its interest in Infoseek (SEEK) was greeted with disdain by the market. But certainly not helping Infoseek and other portals was ongoing weakness in bellwether Yahoo! (YHOO) .
It was difficult to determine what came first, investor unhappiness with the Infoseek-Disney deal or ongoing weakness in Yahoo! dragging down Infoseek and the rest of the portals.
In the case of Infoseek, investors may just have been selling the fact after buying the rumor -- and in this case you couldn't even say that. Disney said back in
June that it was looking to expand its relationship with Infoseek, so today's announcement certainly was not a surprise. And when that news was in the market, shares of Infoseek rallied into the 50s, closing at 51 1/2 on Friday. Analysts from
put the value of Infoseek shares at $52, so there was little reason for investors not to take some profits.
Dan Marciano, head of equity trading with
, said that the deal also was not easy for investors to understand. Disney will be rolling its other Internet businesses together with Infoseek to create a single Internet business called
, which will be issued as a new class of stock. Under terms of the transaction, Infoseek shareholders will receive 1.15 shares of go.com for each of their Infoseek shares. Disney will have a 72% retained interest in go.com following the merger. Bottom line, Infoseek shareholders will be receiving shares of stock in a company that is not yet trading.
Infoseek closed down 5 9/16, or 11%, at 45 15/16. Disney showed little movement on the news, closing up 3/16, or 1%, at 27 13/16.
Infoseek certainly was not helped by the ongoing weakness in Yahoo! The Net portal closed down 9 3/4, or 6%, at 150 1/4, and has now fallen 25 points since reaching a high of 175 1/4 the day after it reported earnings last Wednesday. Marciano said there remains a lot of nervousness in the Net sector after its recent setback. Investors, including portfolio managers, are just taking money off the table. A window for Yahoo! employees to sell stock also opened today and may have contributed to the losses. According to a Yahoo! spokesperson, the window is open for a few weeks beginning 48 hours after earnings are reported.
Other portals were weak as well.
closed down 4 3/16, or 4%, at 103 and
finished down 2 1/16, or 4%, at 52 3/4.
Other Net bellwethers suffered similar fates to Yahoo! and contributed to weakness in the sector.
closed down 8 1/8, or 6%, at 117 3/8.
closed down 6 1/4, or 5%, at 122.
also closed sharply lower, down 7 7/8, or 6%, at 127 7/8. eBay's site had more technical problems that left pages of the online auctioneer inaccessible for a few hours on Saturday.