Liquid Audio Rocks on an Otherwise Down Day

Yahoo!'s postearnings softness has set the tone for the Net sector.
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SAN FRANCISCO -- When Musicmaker.com (HITS) sang a sweet tune on its first day of trading Wednesday, it showed again just how hot the IPO market is and how strong the demand for companies in the digital music field is. That trend continued today with the debut of Liquid Audio (LQID) .

Liquid Audio, which provides software that enables the digital delivery of music over the Internet, was recently up 23 9/16, or 157%, at 38 9/16. That was below the 43 level where the stock opened, however. Performance of the company has been a little brighter than Musicmaker.com, though it does not appear close to turning a profit. For 1998, the company reported a loss of $8.5 million, and in its most recent quarter, it reported a loss of $4.1 million on revenue of $531,000.

By comparison, Musicmaker.com, which provides customized music CD compilations over the Internet, had revenue of $74,028 in 1998 and revenue of $20,160 in the first quarter, when it lost $1.8 million. But that didn't stop investors from doubling Musicmaker.com's stock from its initial price of 14. After peaking at 28 1/8 on Wednesday, Musicmaker.com has slid to 18 5/8 in recent trading, down 2 5/16, or 11%.

The performance of Liquid Audio was one of the only bright spots in what has turned into a mostly down day for the Internet sector.

TheStreet.com Internet Sector

index was recently trading down 3.28 at 661.68, erasing earlier gains.

The sector appeared to be taking its cues from

Yahoo!

(YHOO)

, which has turned lower after trading higher early in the session. Yahoo! was recently down 3 11/16, or 2%, at 160 3/4 after trading to a high of 167 earlier in the session. The stock has not been able to take advantage of a solid earnings report on Wednesday.

Dick Dickson, technical analyst with

Scott and Stringfellow

, said he has been surprised by Yahoo!'s poor performance since the report and that the Internet sector could suffer if the stock continues to fall. He said the 160 level that Yahoo! has dropped below today was its breakout level during its recent rally, but if it takes out 150, "we could have some big problems."

Dickson said other momentum indicators he has been watching were generally positive for the Net sector, and unless this latest weakness is a "head fake," he may have to reexamine things to see if things are more negative than he thought.