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Stock markets' love affair with the Internet could be on the rocks

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Net companies have taken a battering on the stock market this morning after a week of hype left many people wondering if the UK was about to experience a US-style boom in technology shares. Dixons -- the company behind the successful free Internet Service Provider (ISP) Freeserve -- fell 61.5p this morning and Internet Technology Group (the company behind Global Internet) saw its shares fall 20 per cent. On-Line -- which operates games on the Internet -- had seen its share price go through the roof this week but it dropped some 44 per cent on the morning's trading. Zergo and Energis -- other Net-related companies that have hogged the financial pages of the daily newspapers during the last five days -- have all fallen back during the morning's trading. The question is, is this the end of the UK's Web-led boomlet? Has the market called time on "Web-crazed investors", as the Daily Mail put it yesterday, even before it really got started? Or, is this just a timely blip to ward off gullible investors who are too easily tempted to back a company -- any company – just as long as it has something to do with the Net? Or, has it got anything to do with the fact that yesterday, stocks in the US -- including Net shares such as Yahoo!, Amazon.com and AOL which all posted large losses -- tumbled as investors indulged in synchronised profit-taking? Who knows? Either way, yesterday's plummet was unfortunate for John F. Luikart, chairman and CEO of Sutro & Co, of one of the oldest and largest regional securities firms in the business. Speaking to an audience of senior financiers yesterday evening, he said the Internet stock bubble was certain to burst. And when it does, the people holding the stocks will suffer huge losses. Nice timing, John. Had he delivered his speech 24 hours earlier, he could have been hailed a financial guru as he spotted the imminent collapse of Net stocks. The fact that he made his prediction after the Dow Jones closed last night just takes the edge off his timely oration. It would be foolhardy to say that the US Net share bubble has burst, but someone, it seems, has definitely let some air out. ®

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