Yahoo! leads dot-coms down
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January 12, 2000: 6:04 p.m. ET
Internets head lower; chip makers shine as market awaits Intel's 4Q earnings
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NEW YORK (CNNfn) - Yahoo! took center stage in the technology sector Wednesday, as the Web portal's post-earnings price decline pulled most of the other dot-coms down along with it.
After opening at 389-7/8, Yahoo! (YHOO), which reported better-than-expected fourth-quarter financial results on Tuesday, ended Wednesday's session down 39-13/16 at 357-9/16, a 10 percent decline on the day. Shares of Yahoo! closed at 397-3/8 on Tuesday.
During a conference call Tuesday night, Yahoo! executives indicated that the company's current rate of revenue growth rate is not sustainable, but Wall Street analysts on Wednesday said they were not surprised to hear that, considering the tear the company has been on recently. During the most recent quarter, Yahoo! posted a year-over-year revenue increase of 120 percent.
Most analysts were upbeat about Yahoo!'s most recent quarter, but some expressed concern about the current valuation of the shares.
Merrill Lynch analyst Henry Blodget on Wednesday raised his 2000 earnings estimate for Yahoo! to 79 cents per share from 68 cents and maintained his "buy" rating on the stock.
"As it gradually transitions from hyper-growth to a long-term growth, Yahoo! remains one of the three top franchises in the business-to-consumer sector -- and, in our opinion, it is still ideally positioned for the future," Blodget said in a research report. "We continue to regard the stock as a core holding."
Lise Buyer of Credit Suisse First Boston said that the assumptions required to justify Yahoo!'s current price "are not rational," and advised investors to be cautious.
"We do not think it prudent to chase Yahoo! at these levels but rather believe investors should take advantage of expected periodic weakness to add to positions in this rapidly growing, extremely well-managed, conservative, flexible entity," she wrote.
Other investment banks changing their opinions on Yahoo! Wednesday included Lehman Brothers, which raised its 2000 earnings outlook to 75 cents per share from 65 cents per share; Donaldson Lufkin and Jenrette, which raised its fiscal 2000 EPS outlook to 78 cents from 71 cents; Bear Stearns, which raised its 2000 earnings outlook to 74 cents from 68 cents; and Deutsche Banc Alex. Brown, which raised its price target on the stock to $450 from $250.
Conjecture that Yahoo! would seek to team up with a major media company in light of this week's mega-merger between America Online (AOL) and Time Warner (TWX) also fizzled on Wednesday. Shares of Yahoo! peaked on Monday, after the AOL-Time Warner deal was announced, in a buying frenzy that many market observers attributed to speculation that the company was next in line for such a partnership.
In an interview on CNNfn's "In the Money" program, Timothy Koogle, Yahoo!'s chairman and chief executive, said the company will continue to use its highly valued stock to make acquisitions.
However, he indicated that buying a traditional U.S. media company would limit Yahoo!'s growth as a global distribution platform for Internet content and e-commerce.
"We've bought about 13 companies, and we are going to continue to be acquisitive," Koogle said. "But we are going to do it where it makes sense and actually adds to the growth of the company, as opposed to slowing the company down."
The advantage to remaining independent is that it will enable Yahoo! to offer its users the broadest range of choice, which Koogle said has been one of the driving principles behind the company's fast-growing business. [292K WAV or 292K AIFF].
Most observers concurred on Wednesday that Yahoo!'s future acquisitions would likely center on companies that add to its technology base, specifically those that can help it extend its development of high-speed and wireless Internet access.
Other dot-coms ended Wednesday's session broadly lower as well. The Dow Jones composite Internet index slid 20.98 points, or 5.4 percent, to 368.02.
Shares of Internet venture-capital firm CMGI (CMGI) slipped 14 to 123, a 10.2 percent decline on the day. Internet advertising outfit DoubleClick (DCLK) slipped 7.5 percent, finishing 8-13/16 lower at 108-3/16.
Web software developer Inktomi (INKT) slid 12.6 percent, shedding 12-5/8 to 87-5/16. Shares of Internet domain-name registrar Network Solutions (NSOL) slipped 10-21/32, a 4.6 percent decline on the day.
Shares of Ariba (ARBA), which specializes in business-to-business e-commerce technology, slipped 9.5 percent, falling 18-1/8 to 172-7/8, even after the company posted a smaller net loss than analysts had expected for its fiscal first quarter after the closing bell on Tuesday.
Shares of AOL (AOL) also retreated further on Wednesday, finishing down 3-7/8 at 60-1/8.
Internet winners on Wednesday included service provider Concentric Network (CNCX), up 13/32 at 37-7/16; Exodus Communications (EXDS), up 4-13/16 at 107-3/8; and USWeb (USWB), up 3/16 at 38-13/16.
The tech-driven Nasdaq composite index ended the session down 71.17 at 3,850.2, a 1.82 percent decline on the day.
Semis shine amid broad market slide
Chip makers were the bright spot in an otherwise gloomy tech sector on Wednesday, led by Intel (INTC), which ticked up 1-9/16 to 91-1/4 ahead of the release of its fourth-quarter earnings report.
After the closing bell on Thursday, Intel, the largest supplier of microprocessors, will kick off what many analysts are expecting to be a solid earnings season for chip makers across the board.
Analysts polled by earnings tracker First Call are expecting Intel to report earnings of 63 cents per share, and two analysts on Wednesday boosted Intel with upgrades and bullish comments.
Other big winners on Wednesday included analog chip maker Anadigics (ANAD), which soared 16.2 percent, finishing 8-3/4 higher at 62-11/16. Micrel (MCRL) climbed 6-5/8 to 66-5/8, an 11 percent rise on the day. Communications chip maker Broadcom (BRCM) added 16-1/12 to end the session 6 percent higher at 284-1/2.
Cypress Semiconductor (CY) finished at a new 52-week high, ticking up 4-11/16 to 35-3/4 after Robertson Stephens analyst Dan Niles raised his earnings estimates for the company and set a $40 price target for 2000.
Chip makers on the decline Wednesday included PMC-Sierra (PMCS), which slipped 3-3/8 to 149-1/2, and Conexant (CNXT), which finished down 1-1/2 at 63-7/8.
The Philadelphia Stock Exchange's semiconductor index added 24.5, or 3.4 percent, to close at 741.59.
Blue chips mixed, MSFT falls on antitrust news
Among technology blue chips on Wednesday, IBM (IBM) gained 5/8 to 119-5/8 after the No. 1 computer maker announced a $2 billion component-supply deal with electronics distributor Bell Microproducts (BELM). Bell shares soared more than 17 percent on the news, ending 1-5/8 higher at 11.
Shares of Microsoft (MSFT) dropped 3-9/16 to 105-13/16 amid published reports that the U.S. government favors breaking up the company to settle its landmark antitrust case.
The Justice Department on Wednesday morning labeled the report, which appeared in USA Today, inaccurate but declined to elaborate further. However, Reuters news service on Wednesday afternoon reported that sources close to the matter said the article was correct in saying the government favored a break-up, but incorrect in the details of how the government proposed to do so.
Elsewhere among technology blue chips on Wednesday, Cisco Systems (CSCO) slipped 2-11/16 to 103-13/16; Lucent Technologies (LU) fell 1-1/4 to 55; Oracle (ORCL) shares slid 6-3/4 to 105-5/8; And Sun Microsystems (SUNW) lost 3-3/8, ending the session at 74-3/8.
On the upside, shares of computer maker Compaq (CPQ) added 1-1/4 to 29-1/4; Hewlett Packard (HWP) added 3-13/16 to 112-3/8; Texas Instruments (TXN) advanced 1-1/2 to 101; and Motorola (MOT) shares gained 1-1/16 to end the session at 133-13/16.
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