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Web stocks suffer
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September 27, 2000: 4:43 p.m. ET
Web stocks plunge in wake of Priceline warning; 3Com gains on earnings
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NEW YORK (CNNfn) - Web stocks suffered Wednesday, due to concerns about future levels of Internet advertising and a revenue warning from Priceline.com.
On a day when the Nasdaq composite index closed down less than 1 percent, the Philadelphia Internet index lost a much more severe 6 percent.
Investors decided to name their own price for the Web e-commerce firm Priceline.com, after the company warned of a shortfall in its third-quarter revenue, with shares of the company falling 45 percent.
Internet marketer Priceline.com (PCLN: Research, Estimates) warned Wednesday that third-quarter sales would fall short of Wall Street forecasts because of slowing airline ticket sales. The Norwalk, Conn.-based company said that it expects to report third-quarter revenue of about $340 million to $345 million, well below Wall Street forecasts of about $370 million.
In response, the company's stock plunged $8.25 to $10.38 Wednesday, a 45 percent loss and about one-tenth of its 52-week high of $104.25 
The selling spread to other Web stocks, most notably the leading Web portal Yahoo! (YHOO: Research, Estimates), which plunged $12.06 to $90.38, a 12 percent loss. At its current price, Yahoo! is 64 percent below its 52-week high of $250.06.
Yahoo! and other major Web companies that derive most of their revenue from advertising have been hit by concerns that Web advertising is slowing. SG Cowen analyst Scott Reamer recently issued a report saying that Internet advertising is in "near-term retreat."
"Suddenly, the ad sales guys have gone from the heady times of last year when they were order takers to today's reality of working the phones hard," Reamer wrote.
Among other major Web stocks, Amazon.com (AMZN: Research, Estimates) was down $2.88 at $36.88, America Online (AOL: Research, Estimates) lost $2.48 to $53.02, Go2Net (GNET: Research, Estimates) shed $4.12 to $50.13, and eBay (EBAY: Research, Estimates) dropped $6.94 to $63.75.
3Com rises after earnings report
Separately, networking equipment maker 3Com rose Wednesday after the company reported fiscal first-quarter results that beat analyst estimates. After the close Tuesday, 3Com (COMS: Research, Estimates) reported a pro forma net loss, excluding special items, of $41.3 million, or 12 cents per share, compared with a profit of $113 million, or 32 cents a share, in the year-earlier quarter. Analysts surveyed by First Call had expected the Santa Clara, Calif.-based company to report a loss of 33 cents a share.
Sales fell 22 percent to $933.8 million from $1.2 billion a year ago. In response, 3Com's stock jumped $2.88 to $16.81 Wednesday, a 21 percent gain.
Lehman Brothers lowered its fiscal 2001 loss estimate for 3Com to 25 cents from 69 cents per share, citing the strong first-quarter results. The securities firm also raised its fiscal 2001 revenue estimate to $3.8 billion from $3.3 billion, and fiscal 2002 revenue estimate to $4.8 billion from $3.8 billion.
"With the restructuring essentially finished, we expect investors to now focus on 3Com's emerging technologies and its bottom line," Merrill Lynch analyst Michael Ching said in a research note. "We continue to look for the company to report a breakeven fourth quarter, although earnings per share could turn positive in the second quarter due to non-operating gains."
Separately, shares of business-to-business e-commerce company VerticalNet (VERT: Research, Estimates) gained $1.69 to $31.94 after Lehman Brothers analyst Patrick Walravens repeated his "buy" rating on the stock and said the company's third-quarter results "should easily beat our projection of $64 million in revenue and a loss per share of 28 cents."
VerticalNet is down 47 percent this month. Even at this reduced price, however, the company is selling for more than 250 times Walravens' fiscal 2001 earnings estimate.
Finally, Corning Inc. agreed Wednesday to buy Italian tire and cable company Pirelli SpA's stake in an optical components and devices venture for nearly $3.6 billion cash, giving the U.S. company critical leverage to grow its dominant fiber optic business on a global scale.
The transaction will give Corning (GLW: Research, Estimates) Pirelli's 90 percent interest in an optical component and submarine optical transmission systems collaboration struck with U.S. Internet equipment maker Cisco Systems Inc. (CSCO: Research, Estimates) late last year. Cisco will retain its 10 percent stake in that venture, which produces the components primarily in Europe.
Corning stock plunged $21 to $304, a 6.5 percent loss, although the company's stock is still about five times higher than its 52-week low of $62.62, as optical networking stocks have surged. Cisco Systems rose $1.87 to $57.06 
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