On a Quiet Day, Schwab's Report Helps Weaken Online Brokerages

Plus, Microsoft became a Net play amid reports the company is creating a tracking stock for its Internet businesses.
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SAN FRANCISCO -- Internet stocks slipped into the weekend, as investors took profits in a mostly quiet session. TheStreet.com Internet Sector index finished down 10.98, or 1.7%, at 638.73.

One of the few news items in the sector today was an earnings report from

Schwab

(SCH)

, which contributed to weakness among online brokerages. Schwab bested earnings estimates by a penny at 18 cents a share while reporting record revenue of $982 million, but warned that profit margins could shrink in the second half of the year.

The company mentioned the recent rate hike by the

Federal Reserve

along with spending on staff and technology because of increased demand as reasons why profits could slip.

Schwab closed down 2 15/16, or 5%, at 52 7/16.

Ameritrade

(AMTD) - Get Report

closed down 1 11/16, or 5%, at 34 1/4, while

E*Trade

(EGRP)

finished down 1 1/2, or 4%, at 37 1/2.

Microsoft

(MSFT) - Get Report

became an Internet play after

The Wall Street Journal

updated a story indicating the software giant was considering creating a tracking stock for its Internet businesses.

Microsoft was higher on news of the potential offering early in the day, then got even more of a lift after a federal jury in Connecticut ruled that Microsoft didn't violate federal antitrust laws in a case involving software firm Bristol Technology. It finished up 5 1/16, or 5%, at 99 7/16. There may also have been some optimism ahead of the company's earnings report on Monday. Microsoft is expected to report earnings of 36 cents a share, according to

First Call

.

Another major play today was in the IPO market, with successful debuts from two companies.

Paradyne Networks

(PDYN:Nasdaq), a DSL equipment provider, closed up 39 1/4, or 231%, at 56 1/4. And

Audible

(ADBL)

, which offers spoken audio of books, newspapers and magazines on its Web site, ended up 12, or 133%, at 21.

Next week the focus will be squarely on earnings -- it's the busiest week of the reporting season so far for Net stocks. Among companies reporting on Monday are

DoubleClick

(DCLK)

and E*Trade. DoubleClick, which closed down 1 3/4, or 2%, at 100 1/8, is expected to report a loss of 13 cents a share, according to First Call. E*Trade is expected to report a loss of 12 cents a share.

Also reporting Monday is

AdForce

(ADFC:Nasdaq), a supplier of online ad management technology that was featured in Adam Lashinsky's column on

TheStreet.com

today. AdForce closed up 4, or 16%, at 29. It is expected to report a loss of 58 cents a share.