Blue-chip shares rallied to a new high Wednesday, but the rest of the market couldn't keep pace as investors mulled weaker earnings in the tech sector.
That said, Lycos remained one of the busier stocks as efforts gathered steam to find the company a different buyer, and Microsoft occupied itself with bringing millions of Chinese online.
In generally lifeless trading, the Dow Jones Industrial Average gained 79.08 points to close at a record 9772.84, and the Wired Index was 7.70 higher at 616.24. The Nasdaq Composite Index rose 13.07 to 2406.01, and the S&P 500 was up 7.00 at 1286.84.
Much of the Dow's advance stemmed from component DuPont (DD) rising US$4 to $57.56 on word that the chemical giant will issue a tracking stock for its life science business, and that it expects to enter into new alliances with drug companies. DuPont's shares were upgraded by Deutsche Bank to "accumulate" from "hold."
Fellow Dow members Chevron (CHV) and Exxon (XON) also contributed to the blue-chip rally, gaining ground on a surge in world oil prices. Arab oil producers are backing a cut in production to reduce a present oversupply in fuel markets.
Tech stocks showed considerably less resilience, although, as is often the case, Microsoft's activities merited scrutiny.
Say what you will about Bill Gates -- the dude's nothing if not ambitious. Visiting the Chinese city of Shenzhen, Gates said Microsoft's (MSFT) goal is nothing less than "to introduce millions and millions of people" to the Internet, and to do this he unveiled a set-top box designed to get the Chinese online through their TVs. The boxes feature a new operating system called Venus, which combines a Chinese version of Windows CE with Internet Explorer and WebTV.
"Microsoft sees an opportunity for low-cost access to the Web," said Jean Orr, an analyst with Nutmeg Securities. "As long as they control the box, it doesn't matter whether it's the TV or the PC." China has about 320 million TV sets but a mere 11 million PCs. A scant 2 million Chinese are said to be Internet users.
So does Microsoft's push into China represent a strategic shift? Does Redmond hope that by finding a beachhead for Windows CE in the vast Chinese consumer market, it will gain an edge over rival operating systems for the next generation of smart appliances?
Orr doesn't think so. Since China is anything but a technology leader, she feels it would be a stretch for the country to serve as standard-bearer for the rest of the world. But Orr does believe it's perfectly in keeping with Microsoft's character to open the door to new opportunities.
"They're covering their bases," she said. "The Internet is evolving, and we don't know which will be the preferred form in the future. Microsoft is making sure that whichever wins, they will maintain a dominant position."
Still, Microsoft's stock slipped 44 cents to $161.38 as traders weighed the company's China initiative against uncertain prospects for settlement of the government's antitrust charges against the software giant. Conflicting reports are circulating as to whether Redmond and the Feds are indeed discussing a compromise.
Meanwhile, Lycos (LCOS) surged 14 percent to $110 after venture-capital firm CMGI, the portal's biggest shareholder, said it had hired Morgan Stanley Dean Witter to hunt down other buyers for the company. CMGI is challenging Lycos' pending merger with USA Networks, which it says places an "inadequate" premium on the portal's value.
Separately, Lycos, soon-to-be parent of Wired News, signed a $52.5 million contract with WebMD to develop a co-branded health care channel and cooperate on e-commerce and marketing efforts. However, the deal -- Lycos' largest to date -- includes making use of USA Networks' TV assets, so it remains to be seen how this will all play out.
Among other Net notables, Amazon.com (AMZN), Yahoo (YHOO), and America Online (AOL) each gained ground after analyst Henry Blodget settled into a new job at Merrill Lynch by advising the broker's clients to buy the three stocks. Blodget's the guy who previously scored some major Street cred by accurately predicting Amazon reaching $400 a share (although some might say his unusually rosy forecast played a big role in the stock's meteoric rise).
Left out in the cold was online auctioneer eBay (EBAY), which fell $11.19 to $155.06 as Spencer Clarke LP initiated coverage of the company with a "sell" rating. Ouch.
Computer Associates (CA) dropped 14 percent to $34.44 after Morgan Stanley downgraded the software developer's shares to "neutral" from "outperform." Analyst Charles Phillips stated the obvious, that demand is down for big-ticket enterprise applications.
In telecom, Qwest Communications International (QWST) advanced $3.38 to $69 after inking a $10 million accord to provide high-speed capabilities to Road Runner, a provider of data services. Road Runner's backers include heavyweights like Microsoft, Compaq Computer, and Time Warner, and the company claims about 180,000 customers.
DaimlerChrysler (DCX) slid 31 cents to $88 as it called off talks with Nissan Motor about purchasing a stake in the ailing Japanese automaker. While no reason for the decision was given, a factor was undoubtedly Nissan's $30 billion in debt, which wouldn't have sat well with DaimlerChrysler shareholders. France's Renault is now the most likely candidate for a partnership with Nissan.
Lastly, an outfit called LodgeNet Entertainment (LNET), which provides movies and video games to hotel guests, jumped 15 percent to $8.38 on news that it will team with AT&T to add high-speed Net access to its plate of in-room services.
This should at least give business travelers a better way to spend their time. Among the top 10 pay-per-view movies watched by bored LodgeNet users last year were Titanic, The Wedding Singer, US Marshals, and Lethal Weapon 4.
