• by Ross Fadner , July 23, 2004

Several major Internet companies announced second-quarter results that under-performed in the eyes of Wall Street this week, causing investors to pull shares. Amazon.com, DoubleClick, eBay, Orbitz, and Yahoo! all saw declines in trading Friday.

DoubleClick was by far the biggest loser, down 25 percent following poor second-quarter results. The company's CEO Kevin Ryan admitted that the quarter was "disappointing" during a conference call with analysts late Thursday. Investors responded by dumping the stock, a trend that continued well into Friday.

Amazon.com shares fell 12.5 percent, following its report that singled out free shipping as the chief deterrent to second-quarter profits.

Online auctions powerhouse eBay fell another 2 percent Friday, following Thursday's 7 percent slide; the company reported its second-quarter results on Wednesday. Chief Financial Officer Rajiv Dutta, in an interview with CBS MarketWatch, said the company is experiencing "more pronounced slowdown [in the U.S.] than in prior years."

Yahoo!, despite doubling second-quarter revenue and profits year-over year, continued its slide (down 2 percent) since missing the mark with its revenue projections for the quarter and lower-than-expected third-quarter outlook.

Netflix, Orbitz, and CNET, which both posted relatively positive earnings by Wall Street standards, remained relatively flat on Friday.

The last few weeks have been decidedly poor for Internet stocks on Wall Street. Some analysts attribute the overall slide to a statement made by online movie rental site Netflix in its Second Quarter earnings report.

"Netflix probably didn't mean to do it. But you can blame the Netflix conference call for a lot of the major damage in the dot com world," writes James Cramer, markets commentator of TheStreet.com.

The company--which already spends quite a bit on advertising--said it will continue to focus on subscriber acquisition in the third quarter, but will shy away from Internet advertising because second-quarter rate increases have made it too costly.

In addition to the negative PR generated by such comments, many of the abovementioned companies--including DoubleClick, Microsoft, and Orbitz--lowered their full-year guidance. However, Yahoo! boosted its revenue outlook for 2004 to between $2.46 billion and $2.54 billion.

Software giant Microsoft reported an 81 percent jump in second-quarter net income to $2.69 billion from $1.48 billion a year ago, and a 15 percent revenue increase. The company said the increase was driven by growth in its core business for personal-computer software. As expected, the software giant lowered guidance for fiscal 2005 earnings to reflect its plan to pay out some $75 billion of its cash to shareholders, which was announced earlier this week.

The lukewarm-to-cold second-quarter results posted by these major Internet companies may cause concern for Mountain View, California-based Google. Some industry analysts say the company may rue its decision to have its initial public offering in the next few weeks, as opposed to a few months ago. This is not to say the IPO will be failure--the stock is still in very, very high demand--but the market's reversal in its outlook for Internet stocks has been brusque, to say the least, this July.