Internet stocks move to higher ground

Net stocks move to higher ground

NEW YORK (CBS.MW) — After an early-morning struggle, Internet stocks moved to higher ground, extending their climb to a fourth day, with shares of EBay, Evoke and optical networking companies in leading positions.

The Goldman Sachs Internet Index ($GIN) edged up 1.3 percent. That Net barometer has gained 4 percent in the past three sessions. The Amex Internet Index ($IIX) added 1.8 percent. Merrill Lynch Internet Holdrs (HHH) increased by 1 percent.

EBay (EBAY) ran up 5 9/16, or 10 percent, to stay firmly planted above 60 at 63 1/16 as 7.3 million shares changed hands. EBay traded at 48 ½ as recently as last Friday. Investors have been bidding up shares on optimism that the online auction company’s ability to become a global trading platform has been underestimated.

EBay as world beater

“EBay’s primary competitor in Europe, QXL, recently reported financial results that were below expectations, and this suggests that EBay can be the dominant player in Europe,” said Greg Konezny, an analyst at U.S. Bancorp Piper Jaffray.

“If they can establish the same success in Europe as they had in the U.S. and create the leading single global platform, it’s not [such] a reach to say that EBay can extend that into Japan and other parts of the world.”

Also helping to fuel the enthusiasm was a just-released report suggesting that e-commerce activity is alive and well. E-tail appears to be off to a good start in the third quarter. According to Konezny, online purchases in July were up15 percent from the previous month.

Demand for voice

Net newbie Evoke (EVOK) rose 3/16, or 4 percent, to 5 5/16 after Lycos said it would partner with the recently public provider of Web conferencing and voice chat services. Evoke went public last month at $8, raising $56 million.

Salomon Smith Barney, the IPO’s lead manager, originally hoped to raise $90 million. Separately, Lycos said it was teaming with wireless Internet infrastructure company Mobilee to develop Lycos’ voice portal. The portal is to provide telephone users with free access to Lycos content via a local access number. Lycos stayed firmly above 60, rising 2 percent to 62 in recent trading.

And one of the most popular Net-enabled mobile services may one day be a reality in the United States. Japanese mobile-phone giant NTT DoCoMo is in talks to acquire a minority stake in what could become the second-largest wireless company in the United States, which is being formed by SBC Communications and BellSouth, media reports indicated Thursday.

NTT DoCoMo provides the popular I-mode service, an Internet access service that has amassed about 10 million subscribers paying roughly $25 per month for Internet access via mobile devices.

Demand for speed

Shares of ONI Systems (ONIS) continued to distance themselves from a June IPO price of $25. The stock shot up 13 7/16, or 14 percent, to 108 15/16 after the company said it’s won a multiyear contract with Qwest Communications for optical networking equipment to support high-speed, local broadband connectivity to customers in major markets. Essentially, ONI Systems’ technology alleviates data traffic jams in regional networks.

Shares of other fiber-optic related companies ran up as well.

Exfo Electro-optical Engineering (EXFO), which went public in late June at $26 per share, gained 6, or 11 percent, to 60 1/2; Sycamore Networks (SCMR) rose 12 1/4, or 8 percent, to 161 1/8.

After going public in May at an IPO price of $20 per share, New Focus (NUFO) ran up 6 9/16, or 5.5 percent, to 125 9/16; Ciena (CIEN) surged 15 15/16, or 10 percent, to 179 3/16 on solid quarterly results.

Box vs. platform

Investors warming up to shares of CacheFlow Thursday were cooling on Inktomi after CacheFlow reported that its caching product is gaining traction. Shares of Inktomi (INKT) fell 1 13/16, or 1.7 percent, to 104 1/2, while CacheFlow gained 7 15/16, or 8.5 percent, to 101 3/16.

Late Wednesday, CacheFlow reported fiscal-first-quarter results that beat analysts’ expectations. The company said it generated revenue of $22.4 million, up 75 percent sequentially. “We’re moving aggressively to challenge Inktomi,” said CacheFlow’s chief executive, Brian NeSmith, admitting that Inktomi was the market leader in the caching industry.

A year ago, CacheFlow was behind Inktomi in offering a product that had the flexibility of software but the robustness of an operating system. “We’ve caught up,” boasted NeSmith.

Of note …

Kana Communications (KANA) rose 1 ¾, or 5 percent, to 39 3/4. Shares began the week at 32 before the provider of e-mail and customer relationship management software announced major deals with Cisco Systems and IBM.

Earlier this week, it was announced that Cisco would use Kana’s enterprise relationship management products. On Wednesday, Kana said it had inked a deal with IBM. The value of that relationship could be north of $1 billion over a four-year period, according to CS First Boston.   

ExciteAtHome (ATHM) rose 7/8, or 6.5 percent, to 14 7/16 after the high-speed Net access and portal operator announced that a lawsuit entangling Cablevision, itself and its cable partners AT&T, Cox Communications and Comcast has been resolved.

The parties agreed to dismiss Cablevision’s claims against ExciteAtHome and its partners.