Q2 Reports Could Make Or Break Many 'Net Players

Until Wednesday, it wasn't shaping up as a very good week for Internet stocks. But Wednesday arrived in a big way, bringing with it huge one-day gains for a number of stocks that otherwise had been down since July 5.

The main catalyst for the sharp upturn was 1) Indications that interest rates won't be raised later this month; 2) Yahoo's stellar earnings; 3) General optimism over upcoming quarterly reports; 4) All or some of the above. A colleague of mine thinks Yahoo set up the market by downplaying Q2 expectations, thus getting a bounce of relief when it beat analysts' earnings estimates and doubled revenue. He also thinks most ad-supported sites will exceed projected numbers for Q2, perhaps sparking a summer run-up for stocks many investors have been left for dead.

Some of these companies better hope that's what happens, because I believe this is an especially critical earnings season. A number of 'Net stocks have seen rallies that began in mid-April fizzle out, leaving them back or even below the lows they reached when the market melted down in March.

With investors in the middle of a serious period of sorting winners from losers, it behooves battered 'Net tickers to show signs of life now. Otherwise, they may find themselves permanently placed in the loser pile. Of course, many of them fully deserve that assignation, but for those on the cusp, the window of opportunity is now. The next three weeks will be extremely important.

NOTE: Market Cap figures are in millions of dollars unless otherwise indicated. Float figures are in millions of shares, also unless otherwise indicated.

PERFORMANCE BY SECTOR
                          Ave. 7-Day
                           % Change

Speed/Bandwidth              +7.7%
Consultants/Designers        +6.1%
Content/Communities          +4.1%
Security                     +3.3%
Wireless                     +3.2%
Performance Software         +3.2%
E-commerce Enablers          +2.3%
Internet Services            +1.5%
E-tailers                    -1.1%
Search/Portals               -1.7%
Financial Services           -2.0%
ISPs/Access Providers        -2.2%
Advertising/Marketing        -3.5%


TOP 10 GAINERS                 7-Day % Gain         Category

VMDC   VantageMed              80.0%        Performance Software
NTVN   Netivation.Com          75.0%        Content/Communities
IWAV   interWAVE               71.5%        Wireless
CKCM   Click Commerce          55.2%        E-commerce Enablers
AHWY   audiohighway.com        50.0%        E-tailers
SONS   Sonus Networks          41.8%        Speed/Bandwidth
DTHK   DigitalThink            41.4%        Content/Communities
ATON   Alteon WebSystems       39.6%        Speed/Bandwidth
ZDZ    ZDNet                   37.7%        Content/Communities
INFT   Inforte                 37.5%        Consultants/Designers


TOP 10 LOSERS                  7-Day % Loss          Category

EBKR   Ebookers.com           -35.3%        E-tailers
PLRX   PlanetRx.com           -30.4%        E-tailers
HCEN   HealthCentral.com      -28.6%        Content/Communities
FUSN   Fusion Networks        -27.4%        Internet Services
BVSN   BroadVision            -27.1%        E-commerce Enablers
EGGS   Egghead.com            -25.0%        E-tailers
MDLI   MedicaLogic            -23.8%        Internet Services
WAVO   WAVO Corporation       -23.1%        Performance Software
FAIM   FairMarket             -22.2%        E-commerce Enablers
ENTU   Entrust Technologies   -22.2%        Security

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                       7/12    7-Day   7-Day  1-Month  Market  Float
       Company        $Close  $Change %Change %Ch