Nets, Techs Fall Despite CMGI Earnings, Tame Inflation Data

Internet and technology shares fell Wednesday despite better-than-expected numbers from both CMGI and the Consumer Price Index.

The ISDEX fell 10 to 727, while the Nasdaq fell 53 to 3797 after running into resistance around the 3900 level. The Dow rose 66 and the S&P 500 climbed 1 point. Volume rose slightly to 929 million shares on the NYSE, where advancers led 16 to 12. Nasdaq volume was 1.4 billion shares; decliners led 22 to 17. May’s Consumer Price Index came in 0.1% better than expected, showing a 0.1% rise, while the core rate rose 0.2%, in line with estimates.

Shares of StarMedia , up 2 5/26 to 19 9/16, RealNetworks , up 2 to 45 13/16, and Concentric Network , up 2 to 49, were the standouts in the ISDEX. Sportsline , down 1 3/16 to 15 1/4, 24/7 Media , down 1 1/2 to 15 1/2, and CNET, down 2 3/8 to 29, led on the downside.

Shares of CMGI fell 3/8 to 56 1/4 after trading as high as 62 1/2, despite better-than-expected third quarter earnings and revenue. Revenues rose nearly 50% sequentially. The company realized gains from the sale of shares in Yahoo! and Amazon.com , and recognized $20 million from recent IPO Vicinity . Yahoo was unchanged on the day at 139 1/2, while Amazon fell 2 1/4 to 46 3/4. Internet Capital Group initially followed CMGI higher, but ended down 2 17/32 to 31 15/32. For more on CMGI’s earnings, click
here.

Shares of FatBrain.com fell 1 1/2 to 8 3/16 after the company missed its earnings number. Initial reports did not include numbers from MightyWords and were misreported as exceeding estimates. There was also concern over the company’s cash burn rate. However, Needham & Co. upgraded FatBrain from Hold to Buy, with a price target of $20, on the strength of the company’s core business and confidence that it will be able to secure additional financing.

Shares of Critical Path , up 1 5/16 to 46 3/4, and Aether Systems , up 13/16 to 181 13/16, rose on news that the two will develop messaging and collaboration solutions to businesses and consumers via wireless devices.

eBay fell 4 1/2 to 63 1/2 after announcing plans to buy fixed-price person-to-person trading marketplace Half.com for $313 million to $374 million in stock. Infonautics , which will receive eBay stock in exchange for its stake in Half.com, rose 25/32 to 4 3/4. Robertson Stephens upgraded eBay to Strong Buy on the news. PaineWebber reiterated a Buy rating on eBay and $142 price target, noting that eBay will “tap into Half.com’s impressive traction (250,000 registered users after only five months of operation).” The deal is expected to be dilutive by about 3 cents in the second half of 2000, but slightly accretive in 2001. For more on the deal, click here.

Shares of Digital River fell 2 3/4 to 10 3/8 after the company’s presentation at the Bear Stearns technology conference left analysts wondering if the company might not make its numbers this quarter.

Red Hat rose 13/16 to 22 5/8 after announcing the acquisition of Linux communications software developer WireSpeed Communications for 1.5 million shares. For more on the story, click here. Red Hat is expected to report a loss of 4 cents before the bell on Thursday, in line with the year-ago quarter.

Shar

es of About.com recovered 2 1/8 to 35 1/2, a day after falling in sympathy with NBC Internet’s earnings warning. NBCI fell further, down 7/16 to 17 3/16.

Shares of FairMarket gained 1/4 to 10 despite news that it will host the new Lycos small business auction.

Shares of TiVo soared 12 3/16 to 33 3/4 on news that America Online will make a $200 million investment in the company. The companies will develop an AOLTV-branded set-top box, and TiVo will become the exclusive provider of personal TV features on the boxes. Shares of Liberate gained 3 1/16 to 28. AOL shares rose 1 1/16 to 52 11/16 on news that it will be added to the S&P 100.

Shares of MatrixOne rose 4 1/4 to 30 1/4 on news of an alliance with Ariba . Ariba fell 2 to 74.

Shares of Interwoven rose 7/8 to 76 1/4 on a CS First Boston Strong Buy rating and comments that the company is expected to exceed second quarter earnings and revenue estimates.

Visual Networks fell 18 1/64 to 36 19/32 on a Janney Montgomery Scott downgrade. Merrill Lynch called the weakness a buying opportunity.

Intermedia Communications rose 1 1/4 to 34 3/4 on rumors that Broadwing will make a bid for the firm in an attempt to gain control of Internet hosting company Digex .

Network Appliance fell 9 9/16 to 76 1/2. Prudential reiterated a Strong Buy and price target of $136, but cut 2001 estimates from 35 cents to 30 cents.

ESpeed fell 3/8 to 35 1/8 after trading as high as 38 3/4. The operator of electronic marketplaces for trading securities was rated a Strong Buy with a $68 price target in new coverage at Prudential Volpe Technology Group.

Some technical comments on the market: The Nasdaq continues to struggle with the 3900 level, getting turned back at about the 3880 level today. At some point, the bulls will tire if this struggle is not resolved to the upside, and a bearish moving average crossover on the Nasdaq is imminent. Again, our trading range on the Nasdaq is 3700-3900; a convincing break of either number should tell us which way we’re going (with the caveat that there’s a lot of overhead supply on the Nasdaq, with the next stop the 3950-4000 range). The S&P 500 is right at the upper boundary (1480) of its bearish “diamond” pattern, so we need to define “convincing break” here: out of a pattern like this, it is normally a close 3% higher than the level in question, on high volume. That means we want to see 1525 on the SPX on a closing basis and well over a billion shares on the NYSE before believing in this move. That’s not as much as you think, because a break of this pattern to the upside would imply a move to about 1700. On the Dow, I’m going to set our trading range at 10,500 to 10,755, to encompass yesterday’s low and the moving averages and upper boundary of our bearish descending triangle.

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