Surf’s Up Buying Frenzy Fuels Surge In Shares Of Internet-Related Companies

Stock price gains in several Internet-related companies Friday extended a two-week rally driven by strong earnings and growing investor awareness of the companies’ potential.

Several stocks - including Netcom On-Line Communication Services Inc. and Spyglass Inc. - jumped more than 10 percent before investors took profits on their holdings. Both stocks closed higher on the day, though.

Netscape Communications Corp., which sells a popular program for navigating the World Wide Web and went public in August at $28 per share, traded above $100 for a third consecutive day but finished lower.

And an index of Internet-related stocks compiled by the trade publication Interactive Week closed at 255.31 on Friday, up from 215.04 on Oct. 18, the day it opened for options trading on the American Stock Exchange.

The higher values reflect increasing confidence in Internet-related companies as more people have come to understand that the software and equipment for the public data network can also improve data systems within businesses and institutions.

And that big opportunity is happening for Internet-related firms now, far sooner than the dreamy “connect everyone everywhere” ideas that get the most attention.

“What people are seeing is more of the business potential versus an interesting entertainment or research use of the Internet,” said William Smith, analyst at Renaissance Capital Corp. in Greenwich, Conn.

Investors have also become more confident in the ability of the Internet-related firms to compete with older, much larger technology companies.

Some of those companies have validated the new marketplace with their product strategies or statements. For instance, details about a memo Microsoft Corp. chairman Bill Gates sent to top executives about the importance of the Internet appeared in The Wall Street Journal on Friday.

The buying frenzy is a bit surprising because the revenue and profits of the companies, though growing fast, is small compared to technology firms with similar market valuations.

It began last week when Netscape and UUNet Technologies Inc. surprised Wall Street with stronger than expected third-quarter earnings reports. Since then, Netcom executives have impressed institutional investors during a tour promoting a secondary stock offering.

Shares in Netcom, an Internet access provider, closed Friday at $79, up 75 cents, on the Nasdaq Stock Market. That’s compared to $52.75, its closing price two weeks ago, on Oct. 27.

Spyglass, which licenses the core Mosaic technology for World Wide Web software, finished at $92, up $8.50, on Nasdaq. The company’s stock closed at $41.50 on Oct. 27.

Netscape finished Friday at $97.50, down $2.75 on Nasdaq. Its shares were at $81.50 on Oct. 27. And UUNet, an Internet software and consulting company, closed at $72.50, down $1.50 on Nasdaq. That’s up from $47.50 on Oct. 27.

The Internet spree has spilled over to companies who have an interest in the market but maintain broader product lines.

For instance, business software tools developer Quarterdeck Inc. closed at $34.12-1/2, up $1.75, on Friday and up from $22.27 on Oct. 27. And Cascade Communications Corp., maker of switching equipment used for data networks, finished at $83.50, up $3.50. Its stock was at $65.50 on Oct. 27. Both are Nasdaq-listed.