Internet Stocks Hit High Gear in Afternoon

Internet investors finally saw a glimpse of sunshine Thursday as Internet stocks mounted a strong rally in the afternoon to erase heavy morning losses. This came despite the fact that Merrill Lynch’s Henry Blodget late Wednesday predicted that 75 percent of the companies in the Internet sector will either be snapped up or fail.

Blodget became famous after correctly predicting’s stock would hit $400. Speaking to Bloomberg, Blodget said he currently favors companies in the business-to-business market, such as VerticalNet, CyberSource and Ariba.’s Internet Stock Index closed up 28.44, or 7.02 percent, to 433.57, the Nasdaq Composite ended up 25.80 to 2,565.80 and the Dow Jones industrial average finished up 119.05 to 10,793.82.

Most of the sector’s leaders mounted a big turnaround as institutional investors appeared to be coming back to Internets. DoubleClick (DCLK) jumped 12-11/16 to 80-3/8 after being as low as 60-1/2, Inktomi Corp. (INKT) gained 11-3/16 to 103-3/8, Real Networks Inc. (RNWK) ended up 9-5/8 to 70-1/2, Exodus Communications (EXDS) soared 11-3/4 to 119-3/8 and eBay Inc. (EBAY) leaped 17-1/8 to 92-7/8. Inc. (AMZN) closed up 8-13/16 to 97-1/4 and CMGI Inc. (CMGI)gained 3-15/16 to 79-15/16 after hitting 81-1/2 earlier in the session.

America Online Inc. (AOL) was one of the few losers Thursday. AOL ended off 4-3/16 to 83-1/4 and Microsoft Corp. (MSFT) inched up 13/16 to 85-3/4.

The Wall Street Journal reported Thursday Microsoft is planning a low-cost or free Internet access service in a direct challenge to AOL. If MSFT mounts such an effort, it represents a huge threat to AOL’s main revenue stream. AOL generates about two-thirds of its revenue from Internet access fees paid by consumers.

Wit Capital Group Inc. (WITC) soared 4-1/8 to 21-1/4 after the company reached a deal with America Online that will give it an exclusive position on AOL’s After Hours Center which will launch in the fall. The center will provide AOL members with information on how they can trade stocks after hours and will promote Wit Capital’s site.

Business Internet provider Digex Inc. (DIGX) leaped 3-3/8 to 18-7/8. The company on Wednesday reported a second-quarter loss of 36 cents cents a share compared to a loss of 10 cents a share a year ago. Inc. (GOTO) lost 4-13/16 to 24-13/16. The company, which sells search listings, said its second-quarter loss increased to 46 cents compared to 16 cents a year ago.

It proved to be a mixed day for IPOs. Internet Capital Group Inc. (ICGE) vaulted 12-7/16 to 24-7/16. The venture capital firm, which has invested in about 35 e-commerce firms, sold 14.9 million shares at $12.

Cobalt Group Inc. (CBLT) wasn’t so lucky. Shares ended off 2-11/16 to 8-5/16. The company, which manages Web sites for car dealers, sold 4.5 million shares at $11 each.

Internet brokers also recovered. Charles Schwab Corp. (SCH) climbed 4-9/16 to 41-9/16. Warburg Dillon Read initiated coverage of the stock Thursday with a “buy” rating. Analyst Clare Nicksonhavens set a $55 price target over the next 12 months.

Elsewhere in the sector, Ameritrade Holding Corp. (AMTD) added 3-5/16 to 23-7/16, E*Trade Group Inc. (EGRP) gained 3-5/8 to 27-3/8, National Discount Broker Group Inc. (NDB) ended unchanged at 30-7/8, Siebert Financial Corp. (SIEB) shed 3/4 to 18-3/4, and Southwest Securities Group (SWS), parent of, gained 3/4 to 36-1/8. (SALN) lost 1/4 to 8 despite signing a deal with Lycos to distribute content on its network of Web sites.

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