Net Stocks Cool From Record Pace
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Internet issues fell sharply in Tuesday trading ahead of earnings results from a few giant Internet players.
internet.com's Internet Stock Index dropped 46.58, or 5.31 percent, to 831.20, the Nasdaq Composite plunged 128.48 to 3921.19 and the Dow Jones industrial average gave up 61.12 to 11511.08.
Earnings are also due out from E*Trade Trade Group and B2B e-commerce network provider, Ariba. The AOL-Time Warner merger remained the buzz on Wall Street.
Merrill Lynch analyst, Henry Blodget believes the AOL-TWX merger is a smart move as long as the king of new media and king of old media can synergize and execute.
"Fundamentally, we think the AOL Time Warner transaction is a smart, strong combination. The key benefits for AOL, in our opinion, include 1) cable access, 2) multiple channels for cross-selling, 3) revenue diversification, and 4) a dominant global media presence (which should help the company build its international business). The big question for shareholders is whether the market will accord the new entity a traditional valuation or an 'internet valuation.'
"Our answer to this is not surprising: probably somewhere in between. We believe the stock of AOL Time Warner probably has both less upside and less downside than prior to the merger (law of large numbers vs. more diversification). Where the stock trades in this range, in our opinion, will be a function of management's ability to instill confidence in the Street (which we believe will be high). If the merger goes well, as we believe it will, the stock could trade at the high of this range, or $90-$100 in a year," wrote Blodget in a note to clients.
One of the sector's biggest gainers was Kana Communications Inc. (KANA) , up 19 to 216. The e-mail management software maker announced plans for a 2-for-1 stock split.