Internet Companies Slump on Concern About Earnings (Correct)
1/20/99 17:40
(Corrects Horen's rating on Onsale, not Broadcast.com.)
Seattle, Jan. 20 (Bloomberg) -- Shares of Internet companies
slumped, lead by a 19 percent decline in No. 1 online bookseller
Amazon.com Inc., amid concern earnings and profit margins may
fall short of expectations.
Amazon.com fell 26 13/16 to 113 on trading of 15.2 million,
it's biggest drop in five months. Broadcast.com fell 17 3/8 to
120, while Onsale fell 4 1/8 to 46 1/8. Marketwatch.com tumbled
23 7/8 to 72 1/2.
Investors and analysts have become more wary about the surge
in Internet companies' shares and their inability to offer profit
that corresponds to their high-flying valuations. Onsale, an
Internet retailer, said it will sell computer products at
wholesale prices, which raised concerns about other Internet
retailer's ability to maintain their prices and maintain
profitability.
''It was broad concern about the implications of gross
margins of the Onsale announcement'' that pushed Internet shares
down, said Dalton Chandler, an analyst at Needham & Co., who
rates Amazon.com ''hold.''
Onsale said this week its fourth-quarter revenue was reduced
by declining sales of computer products and warned that it would
take longer to reach profitability than expected.
Onsale warned its fourth-quarter results would be lower than
analysts' expected. It will release its results Feb. 10.
''They missed the quarter and they pushed break-even from
the third quarter of 1999 to the third quarter of calendar
2000,'' said Steve Horen, an analyst at NationsBanc Montgomery
Securities Inc. in San Francisco, who lowered his rating on
Onsale to ''hold.''
Onsale also said it will offer products at wholesale prices
through a new program called Onsale atCost. Companies and
consumers will be allowed to purchase computers and other
computer-related products at wholesale prices for a fee. Some
investors and analysts are concerned that this type of pricing
will hurt other companies' gross margins.
Broadcast.com, which transmits audio and video programming
on the Internet, saw its shares hit a record of 285 1/16 last
week. It declined 57 percent since then amid concern that the
Dallas-based company's earnings won't exceed expectations.
''The run-up in the stock may have led some investors to
infer inflated earnings for the December quarter,'' said Philip
Leigh, an analyst at Raymond James & Associate Inc. in St.
Petersburg, Florida, who rates the stock ''accumulate.''
Broadcast.com is scheduled to release its fourth-quarter earnings
Jan. 28.
Other slumping Internet companies include Excite Inc., which
fell 13 3/8 to 96 5/8, and At Home Corp., which dropped 5 5/8 to
109 3/4. Yesterday At Home, which offers high-speed Internet
access over cable-television lines, said it would buy No. 2
Internet search service Excite for $7.5 billion.
Yahoo! Inc. fell 35 13/16 to 287 3/16. America Online Inc.
fell 2 to 148 1/2. Lycos Inc. fell 8 1/8 to 104 13/16 and
Infoseek Corp. fell 10 1/2 to 66 9/16.
--Mylene Mangalindan in the San Francisco newsroom (415) 912-2991
through the Princeton newsroom (609) 279-4000/dl/pkc |
