What’s Hot, What’s Not

It’s crunch time for tech stocks. As if you didn’t know that already.
Brokers are busy thumbing through rolodexes, delivering margin calls by the
baker’s dozen. Panic has started to set in, and the Net high-flyers just
can’t seem to catch a break.

Okay. I’ll admit it. Yesterday, I went on a major Net stock shopping spree,
and you should see some of the deals I got. First, I scooped up the CMGI of
B2B, Internet Capital Group (ICGE), at 80 percent off its 52-week high. As many of you are aware, Safeguard
Scientifics (SFE)
abruptly announced its intentions to move out of B2B last week. For many
investors, that signaled the closing act for the once promising flavor of
the month. Nonsense.

FreeMarkets (FMKT)
looked too tasty to pass up, 85 percent below its 52-week high. With a
ridiculously narrow 3.6 million share float, get ready for blast-off. I
also grabbed an extra helping of Linux and interactive TV, topped off with
a nutritious dose of broadband equipment makers.

Last on my list were cheapo, bargain bin Internet companies that boast
strong brands and a healthy war chest to see them through this latest
market whiplash. Downside risk is ridiculously low, while cash on hand is
enough to outlast a prolonged winter. Say what you will about nasty
competition and an uncertain future, but I own ’em at six bucks a pop.

That’s the way these things go. Market corrections are par for the course,
and weak hands are getting worked over in the worst way. But, when it feels
like Internets are about to buy the farm, the smart portfolios are filling
up faster than an all-you-can-eat buffet.

My best advice is to start picking through the ashes. Add beaten-down
leaders, cash wealthy Nets that are moving toward profitability, and be
sure to steer clear of plain vanilla e-tailers. The last time we
experienced this much excitement was during the summer correction of 1998.
It’ll be some time before we see these deep discounts again. You can take
that to the bank.

Well, enough about me. Let’s take a peek at yesterday’s M&A news and notables.

MP3.com (MPPP)
announced plans to tango with Atlanta-based mp3radio.com. MP3.com
will lasso a majority stake in the start-up from its sugar daddy, Cox
Interactive Media. Terms of the deal were held close to the vest.

Mp3radio.com will take the full
plunge, moving into MP3.com’s San Diego digs and will bring to the table
its 118 radio station affiliates. Shares of MP3.com slipped a buck and
three quarters ahead of news of the deal before falling another dollar
after-hours. It’s been a bumpy ride for the once celebrated e-music
newcomer. The stock is off 86% from its 52-week high, currently hovering
precariously at $12.

However, despite the deflated stock price, this beaten-down stock still
wouldn’t find its way into my portfolio. Until the Recording Industry
Association of America (RIAA) wraps up its MP3 witch hunt, this company
doesn’t boast much beyond a killer domain name.

ShopNow.com (SPNW)
jumped from the frying pan and into the fire when it first announced its
brow-raising B2B millennium makeover three months ago. Although the move
looks legit, ShopNow is now a Web company on the bubble with an identity
crisis. Its share price enjoyed a nice climb following its B2B initiative,
but investors have since left the building.

The online shopping mall announced its acquisition of
Freemerchant.com, an e-commerce ASP that is geared toward small and
medium-sized businesses, Thursday afternoon. With a price tag of $32
million in stock and $2 million in cash, the deal is part of ShopNow’s plan
to merge the Freemerchant.com
network of 65,000 businesses with its existing b2bNow network of 600,000+
companies.

The buyout makes a snug fit, but it’s difficult to make a case for ShopNow
as an investment. Besides its spendthrift cash burn rate, the company just
wrapped up a bloated 8 million share follow-on offering back in February.
Tack on a lock-up expiration this month, and prospective investors might
just find themselves left holding the bag.

Any questions or comments, love letters or hate mail? As always, feel free
to forward them to kblack@internet.com!