Deals Drive Internet Stocks Again

Deals in the Internet sector bring investors into the sector once again after a few weeks of downward trending. Consolidation emerges as a driver of valuation much as it did earlier in the year in round one of merger mania. This looks like round two. ISDEX gains 5% to 573 as NASDAQ beeps up slightly to 2526.39 and the Dow sees some profit taking.

  • CMGI (NASDAQ:CMGI) stock is held by FMR, Fidelity’s parent company, which announces it holds a 10.3% stake in CMGI. Interesting if you recall January 6 in my outlook report of hot stocks to watch for ’99 that I mentioned any portfolio manager that didn’t have CMGI in its portfolio should retire. Fidelity apparently listened.

    The question now is: Is CMGI fully valued? I can see the way clear to CMGI being valued at double its current level. To me this is not a earnings story it’s a holding company story. With CMGI you get a basket of Internet firms in one stock. Also, CMGI’s story relies on solid visionary management and I put Dave Wetherell at the top of my short list.

  • NBC (NYSE:GE) agrees to acquire (NASDAQ:XMCM), and combine it with CNET’s Snap (NASDAQ:CNET) into a new firm called NBCi, a new Internet company owned by NBC. It will include, NBC’s station affiliate Web effort Interactive Neighborhood, multimedia site, and a 10% of soon-to-be beefed up Pro forma, assuming debt conversion by NBC into equity, who owns what: NBC 53%, 34%, CNET and 13%. More and more I think these TV-Web deals could accelerate.
  • Network Associates (NASDAQ:NETA) plans on buying back $100 million of its stock over the next two years. The security software firm’s shares have been hammered by the recent accounting debacle and slate of lawsuits that followed.
  • Digital River (NASDAQ:DRIV) expands its electronic-software delivery to include other digital and analog products. The new effort is dubbed ‘CommerceBridge’ and positions Digital River in the e-commerce outsourcing market. This is where both DRIV and (NASDAQ:BYND) need to be to make the leap to the larger opportunity outside of simply software. Software looks attractive on its own but a suite of e-commerce delivery services looks better to me. This is how giants are made. Bravo to Digital River.

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