Optimism Turns on Internet Issues

Internet issues were lower on Wednesday amid earnings season and concerns
over the current valuations of Internet companies.

The buzz continued to
surround Yahoo! which reported steller numbers late Tuesday, but saw its
shares sink in today’s trading.

internet.com’s Internet Stock Index dropped 40.57, or 4.88 percent, to
790.63, the Nasdaq Composite fell 71.28 to 3849.91 and the Dow Jones
industrial average climbed 40.02 to 11551.10.

Shares of Yahoo! (YHOO)
plunged 39-13/16, or 10 percent, to 357-9/16. In its earnings report
Tuesday, the company warned its current level of revenue growth will not be
sustainable. Still, JP Morgan raised its price target on the stock to $550
and Merrill Lynch analyst, Henry Blodget was optimistic in a research note
to clients.

“Yahoo! reported a very strong quarter, stronger than it looked
crossing the tape. While revenue and EPS(earnings per share) did not top the
highest whisper numbers, the strength of the fundamental business
drivers-audience, commerce, advertising and communications-suggests a great
year ahead. Yahoo! commerce platforms enabled $670 million in e-commerce
revenues for the quarter. We are raising our revenue and EPS estimates and
maintaining our Buy rating.”

Razorfish Inc. (RAZF)
bucked the trend, adding 5-7/8 to 87-1/8. The company Wednesday announced a
2-for-1 stock split and Prudential Volpe Tech initiated coverage with an
“accumulate” rating.

S1 Corp. (SONE)
rose 4-3/16 to 77-1/8. Robertson Stephens Wednesday initiated coverage of
the company, which provides Internet solutions for the financial services
industry, with a “buy” rating.

Digex Inc. (DIGX)
gained 3-15/16 to 69-1/2. The Web hosting firm signed a joint venture with
Compaq Computer Corp. (CPQ)
and Microsoft Corp. (MSFT)
to develop new services for business customers. As part of the deal, both
companies will invest $50 million each in Digex. MSFT shares dropped 3-9/16
to 105-3/16 while CPQ matured 1-1/4 to 29-1/4.

Lycos Inc. (LCOS)
fell 5/16 to 69-15/16 after Prudential’s Volpe Technology Group initiated
coverage with a “strong buy.”

Drugstore.com Inc. (DSCM)
lost 1-15/16 to 30-9/16. The online pharmacy Wednesday bought cosmetic
retailer Beauty.com for $42 million in

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