Net Stocks Encounter Mild Early Pressure

Tech stocks were off their worst levels after 3Com's weak revenue outlook.
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SAN FRANCISCO -- 3Com's (COMS) soft revenue-growth outlook put tech stocks on the defensive Wednesday. The Nasdaq Composite Index beat a modest early retreat amid a swirl of mergers-and-acquisitions intrigue in the personal computer sector.

3Com was sharply lower after warning that revenue in the first and third quarters of 2000 wouldn't exceed year-ago levels. The stock was down 3 7/8, or 12%, at 27 5/8. 3Com Tuesday posted fiscal fourth-quarter earnings of 24 cents a share, 1 cent above the 25-analyst

First Call

estimate and ahead of the year-ago 18 cents. The company also approved a 15 million-share repurchase plan.

Following the report, a number of research houses cut earnings expectations:

Gruntal

downgraded the stock to hold from strong buy, slashing fiscal 2000 earnings estimates to $1.15 a share from $1.38. Analyst David Takata wrote that "the cautious management guidance is not new, but now appears to have an increased sense of urgency."

Early Bounce
Morning action in the Nasdaq 100 and TheStreet.com Internet Sector indices

Source: BigCharts

Meanwhile, deal rumors that swirled

Tuesday among PC makers

Compaq

(CPQ)

and

Gateway

(GTW)

intensified Wednesday.

CMGI

(CMGI)

was rumored to be negotiating to purchase Compaq's Internet assets.

The Wall Street Journal

reported that CMGI could buy

AltaVista

and other Compaq Internet assets for $2 billion to $3 billion and that a deal could be announced as early as tomorrow. In early trading, Compaq was down 3/8, or 1.6%, at 23 7/16 and CMGI was down 1 15/16, or 2%, at 93.

Gateway, which is reportedly in talks to buy Internet service provider

Earthlink Networks

(ELNK)

, was down 1, or 1.5%, at 63 3/4 in early trade. Earthlink is building on Tuesday's 20% rise, adding 6 5/8, or 11%, to 63 7/8.

Also on the merger front,

Metromedia Fiber Network

(MFNX)

agreed to acquire

AboveNet Communications

(ABOV)

for roughly $1.6 billion in stock. Under terms of the deal, AboveNet common stock shareholders will receive 1.175 Metromedia Class A common shares for each AboveNet common share. Metromedia was off 5 1/2, or 13%, at 37, while AboveNet was up 3 11/16, or 10%, at 40 7/16.

And

Newbridge Networks

(NN)

agreed to acquire

Stanford Telecommunications

(STII)

for $280 million in stock. Newbridge Networks was off 1 7/16, or 5%, at 29 5/16 in early trading. Stanford Telecommunications was up 2 1/2, or 9%, at 29.

Network Appliance

(NTAP) - Get Report

was getting a boost on news that it will replace

Ascend Communications

(ASND) - Get Report

in the

S&P 500

after Thursday's close.

Lucent

(LU)

is acquiring Ascend. Network Appliance was up 3 5/16, or 7%, at 48 1/8. Ascend was up 1 11/16, or 2%, at 104 1/4. Lucent was up 5/8, or 1%, at 63 5/16.

IPO Watch

On the IPO front, web software company

Ariba

(ARBA)

debuts today. Morgan Stanley Dean Witter priced Ariba's 5 million-share IPO above-range at $23. Ariba's software is used to automate purchasing of operating resources such as office supplies and computer products.

Also,

GlobeSpan

(GSPN)

, a developer of advanced digital subscriber line integrated circuits, was priced at $15.