RealTime IT News

Correction Hits Market: ISDEX And Interest Rate Talk Don't Mix

The general market scare-off that hit Wall Street this week amid concerns that the Federal Reserve could raise interest rates pulled Internet stocks in a downward draft as those who don't believe in long-term value sought cash quickly. Seven of the 50 stocks in ISDEX managed to beat the drop.

But despite hiccups in the market we believe that critical mass for Internet use in the U.S. provides tonic relief for long-term investors who look for businesses rather than fads to invest in.

 

ISDEX Drops 9% Since April 21

Mecklermedia's

28-Apr-98

% change

Point change

% change

ISDEX .

close

from

from

from

Internet Stock Index

21-Apr-98

21-Apr-98

31-Dec-97

ISDEX Geometric Average

162.13

-9.2%

-16.42

62.3%

ISDEX Price Wtd. Composite

1,656.22

-8.6%

-156.75

59.0%

NASDAQ

1,831.76

-3.8%

-72.11

16.6%

DJIA

8,898.96

-3.1%

-285.98

12.5%

NewsEdge

NEWZ

$ 16.38

22%

$3.00

22%

Cyberguard

CYBG

$ 15.94

12%

$1.69

183%

Broadband Technologies

BBTK

$ 8.00

3%

$0.25

94%

Amazon.Com

AMZN

$ 95.63

3%

$2.56

59%

Netscape

NSCP

$ 25.06

2%

$0.56

3%

E*TRADE

EGRP

$ 23.19

2%

$0.38

1%

Mecklermedia

MECK

$ 24.75

1%

$0.25

-1%

America Online

AOL

$ 75.13

0%

$0.31

66%

Intuit

INTU

$ 51.38

0%

$0.13

25%

RealNetworks

RNWK

$ 32.50

0%

$0.06

134%

@Home Network

ATHM

$ 33.13

-2%

-$0.56

32%

Network Solutions

NSOL

$ 46.31

-2%

-$1.00

253%

IDT Corp

IDTC

$ 28.38

-2%

-$0.63

40%

PSINet

PSIX

$ 14.00

-3%

-$0.50

173%

Yahoo!

YHOO

$ 118.50

-4%

-$4.78

71%

Security First Net Bank

SFNB

$ 10.69

-5%

-$0.56

47%

Network Associates

NETA

$ 66.88

-5%

-$3.88

26%

CyberCash

CYCH

$ 21.34

-6%

-$1.28

68%

VocalTec

VOCLF

$ 18.75

-7%

-$1.50

-9%

Security Dynamics

SDTI

$ 23.81

-8%

-$1.94

-33%

CheckFree

CKFR

$ 25.69

-8%

-$2.19

-5%

Secure Computing

SCUR

$ 11.50

-8%

-$1.00

-3%

Open Text

OTEXF

$ 19.38

-8%

-$1.69

45%

Concentric

CNCX

$ 22.63

-8%

-$2.00

155%

Excite

XCIT

$ 66.47

-9%

-$6.28

122%

PairGain

PAIR

$ 18.38

-10%

-$1.94

-5%

Versant Object Technologies

VSNT

$ 6.19

-10%

-$0.69

-55%

Verisign

VRSN

$ 36.63

-10%

-$4.13

162%

Infoseek

SEEK

$ 33.00

-11%

-$3.88

207%

CMG Info

CMGI

$ 89.38

-11%

-$10.63

195%

Metricom

MCOM

$ 10.50

-11%

-$1.25

9%

Broadvision

BVSN

$ 17.97

-11%

-$2.16

176%

Sportsline USA

SPLN

$ 33.38

-11%

-$4.13

210%

WavePhore

WAVO

$ 15.00

-11%

-$1.88

60%

Cylink

CYLK

$ 13.19

-12%

-$1.81

35%

Lycos

LCOS

$ 58.38

-12%

-$8.19

41%

Earthlink Network

ELNK

$ 65.50

-12%

-$9.25

154%

Mindspring

MSPG

$ 68.75

-12%

-$9.81

104%

CKS Group

CKSG

$ 21.00

-13%

-$3.00

49%

Egghead.com

EGGS

$ 9.81

-14%

-$1.63

51%

CNET

CNWK

$ 32.78

-15%

-$5.72

11%

CDnow

CDNW

$ 29.00

-15%

-$5.13

81%

Doubleclick

DCLK

$ 37.25

-16%

-$6.94

119%

Spyglass

SPYG

$ 10.69

-17%

-$2.19

116%

Axent

AXNT

$ 26.41

-17%

-$5.59

53%

Onsale

ONSL

$ 25.50

-21%

-$6.94

42%

N2K

NTKI

$ 24.94

-24%

-$7.81

71%

Open Market

OMKT

$ 18.75

-26%

-$6.63

95%

CheckPoint Software

CHKPF

$ 31.38

-26%

-$11.13

-23%

USWeb

USWB

$ 27.13

-26%

-$9.63

189%

TOTAL

1,656.22

-9%

-152.63

59%

SIMPLE AVERAGE

33.12

-9%

-3.05

59%

A sleeper for much of this year and last, we see signs of life in NewsEdge (NASDAQ:NEWZ), the company that resulted from a merger of Desktop Data and Individual. It packages and sells content from a variety of sources into the enterprise and Internet markets, serving more than 600 corporations.

While many Internet content firms hype the personalization goal, NewsEdge has been doing this longer than most.

It also leads the market in revenue for 1997 far surpassing PointCast, Dialog, and my this and my that. For 1998 we forecast NEWZ could post about $90 million revenue although we estimate it won't turn earnings positive on an annual basis until next year.

Meanwhile, Cyberguard (NASDAQ:CYBG) came in as the second biggest gainer since April 21 on persistent rumors that it may be an acquisition candidate. Rumor or not, we think the entire security software sector should band up to gorilla size growth soon before Microsoft (NASDAQ:MSFT) puts all the pieces together for its own security server suite. And it will.

Comments made by Microsoft's Steve Ballmer last week mentioned it was taking aim at Check Point Software (NASDAQ:CHKPF), the leader in firewall software. CHKPF's stock free fell on the comment although CEO Deb Triant said it works with Microsoft. Rule #1 in the software space: Wall Street never bets against Bill Gates.

Amazon.com (NASDAQ:AMZN) found softness in its shares until a Monday and Tuesday rally brought it back for a 3% gain since April 21. The Web bookstore is beginning to branch out geographically and provide more offerings. A $275 million debt offer it announced also will fill its war chest. Playing the global space costs.

Netscape (NASDAQ:NSCP) seems to have found a few faithful who believe that its Web site may be more than a convenient default after all. Making the shift from software to media is not easy and we think Netscape may have to bring some media talent into the fold to make it happen.

The e-commerce or e-tail stocks all lost between 13% to 24%. With the drop, we expect "blue light specials" any day now on some of these, led back by AMZN's narrower than expected loss.

Even with the blip on the chart the past week, ISDEX is still up 59% year to date.

However, people are often incorrect about what constitutes an Internet stock. Beware third-tier stocks (none of which reside on the ISDEX) whose main line of revenue has little to do with the Net. While we think genuine Internet stocks have much more potential, third-tier stocks riding the euphoria could sting more than interest rate rumors ever could.