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Led by a Select Few, Net Sector Gathers Steam

The bellwethers were mostly firmer, with some stocks outperforming.

Internet stocks continued to post marginal gains through midday. However, a few Net-related stocks continued their recent ascent, suggesting that not all of the sector's madness is over. Internet Sector

index was up 9.06, or 1.6%, at 572.85 in recent trading, and it was gathering steam as the day progressed. Losses in the overall market after

Bank One's



warning late Tuesday were tempering enthusiasm elsewhere.

Net bellwethers were mostly firmer today, and a number of Net stocks were outperforming.



, which allows users to place low-cost telephone calls over the Internet, was up 16 1/2, or 43%, at 54 1/2. Net2Phone, which announced a deal with




Tuesday, announced another deal today with



. Sprint will be testing Net2Phone technology for phone calls to Asia.


columnist Herb Greenberg takes a look at Net2Phone in a

piece today.

Another strong performer was

Efficient Networks


, a developer of high-speed equipment. The company said that its equipment has been selected by

XinJiang PTA

(the post and telecommunications department in XinJiang, western China) for a digital-subscriber-line network being deployed later this year. Efficient was up 16 1/2, or 43%, at 54 1/2, on the news.


Gadzoox Networks


, which makes products that enable companies to build storage-area networks, was up 13 1/4, or 15%, at 101. It has climbed 25 points this week.

Redback Networks


was up 1 5/8, or 1%, at 137 1/2, after trading as high as 143 5/8. Shares of the supplier of high-speed Internet access equipment undoubtedly were seeing some profit-taking after nearly doubling in price this month. Redback traded at 77 3/8 July 30 on a split-adjusted basis. The stock split 2-for-1 last week.

David Kugler, president of the

Monument Funds Group

, said the volatility in the Internet sector "is not going to go away in the near future," and he expects that networking and equipment companies will "undoubtedly get overbought," but will eventually correct.

"What happens is they get overbought, then they will correct back down and be oversold," he said. "And the job of a professional is to lighten up when they're overbought and pick them up again when they're oversold."

Kugler said his fund was currently trying to stick with the leaders in the various sectors that are close to profitability. He admitted that he has missed the first move in some of the highfliers, but his strategy was to wait for them to tone down a bit, then buy if they determine the stock has good value.