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Net Stocks Bruised After Big Selloff

Net stocks were pummeled after negative comments by Prudential Securities analyst Acampora, and amid ongoing rate fears.

SAN FRANCISCO -- "Bloody" is certainly an apt description of today's trading in the technology sector. The trail of red looked like a scene from E.R. or a David Lynch movie. Few were spared from the carnage, and there was not a happy ending.

The Internet sector was particularly hard hit. There were reports that

Prudential Securities

technical analyst Ralph Acampora issued a "cautionary note" on the Internet group to Pru's sales force today. In the internal call, Acampora reportedly warned "certain support levels are being tested" by several names in the sector.

In addition, fears continued about rising interest rates, while profit-takers emerged during what is usually a slow period for the sector.

TheStreet.com Internet Sector

index closed down 46.7 points, or 7.5%, at 576.6.

Acampora reportedly cited

America Online's

(AOL)

April 19 low of 112, saying the stock could fall to 90 if that level did not hold. AOL closed down 6 15/16, or 5.5%, at 119 1/2. He also reportedly mentioned the March 4 low in

Yahoo!

(YHOO)

at 146. Yahoo! closed down 13 7/16, or 9%, at 137 7/8.

Amazon.com

(AMZN) - Get Amazon.com, Inc. Report

fell prey to the selling that hit the entire sector, but also was hurt by a British newspaper report that

Virgin Group

has set up a book-selling operation with a larger selection than Amazon.com. Amazon.com closed down 11 1/16, or 9%, at 117 1/2.

Online brokerages felt the ramifications of widespread losses among Internet stocks and prospects for higher interest rates. A sustained market downturn will undoubtedly hurt trading activity in online brokerages.

E*Trade

(EGRP)

closed down 3 1/16, or 6%, at 50, while

Ameritrade

(AMTD) - Get TD Ameritrade Holding Corporation Report

was off 10 9/16, or 10%, at 93 7/16.

You had to look hard to find a winner, but

CustomTracks

(CUST)

, which is expected to release a new secure Internet payment system that will not require the consumer to submit a credit card number, surged today. The stock got a boost from a note by

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Joseph Charles & Associates

analyst David Weinstein, who said the system will be previewed in June and set a 12-month price target of 230 on the stock. It closed up 15 1/16, or 25%, at 76, though that was far from its session high of 90.

CustomTracks' gain came at the expense of

VeriSign

(VRSN) - Get VeriSign, Inc. Report

, which provides security for Internet transactions. It dropped 13 3/16, or 10%, to 124.

Finding Solutions

After operating more than six months without a chief executive officer,

Network Solutions

(NSOL)

today filled its top slot by hiring James P. Rutt. Rutt comes to the Internet domain name provider from the

Thomson Corporation

, where he was chief technology officer for the information publisher.

While analysts and money managers are relieved to see the slot filled, they are not exactly heaping praise on the company's new boss man. "It's a good move that they were able to fill this vacancy," says Stephen Sigmond, an analyst with

Dain Rauscher Wessels

, which maintains no underwriting relationship with Network Solutions, but is a market maker for the stock. "But this is not someone who has a high profile on the Street."

From 1994 to 1997 Rutt served as CEO for

Thomson Technology Services Group

. Prior to Thomson, Rutt cofounded

First Call

, which was acquired by Thomson Corporation. Rutt, who holds a B.S. from

MIT's

Sloan School of Management, takes over the reins from Michael A. Daniels, Network Solutions' acting CEO and chairman, who will retain his role as chairman. Robert Korzeniewski will continue as acting chief operating officer and chief financial officer.

To get a better handle on the new hire, Sigmond said he will visit the company in the next week or two and meet Rutt. Compared with other less mature Internet companies, Sigmond said that Network Solutions' CEO position is not as critical to the success of the Herndon, Va.-based company. Network Solutions is a profitable and well-established business with a leading position in the market for registering Internet domain names, says Sigmond.

Still, a few financial question marks cloud the future of the company. Apart from the CEO issue, analysts say Network Solutions faces uncertainty over its new competition, pricing issues that are in flux and the status of the root database of Net addresses that it maintains under contract with the U.S. government.

-- Spencer E. Ante

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