Familiar faces in new-media rally

Apple, Amazon lead May gainers; TiVo, Napster, Netflix slide

The Nasdaq made a healthy 3.1% move to the upside last month, though investors had to think outside the box if they were to pick new-media stocks that benefited from the tech rally.

Among the winners were Apple Inc., parent of iTunes, iPod and Apple TV; VeriSign Inc., which is in a mobile entertainment partnership with News Corp. that runs the dot-com and dot-net domain name registry; RealNetworks Inc., the Internet video company that also runs one of the more successful music-subscription services; and Take-Two Interactive Software Inc., the video game studio being turned around by Strauss Zelnick and company.

Apple late last month struck a relationship with YouTube to bring its user-generated short films to TV screens by way of the Apple TV set-top box.

Apple garnered a whole lot of news coverage with its YouTube news, probably because it happened at the D: All Things Digital conference, where Apple CEO Steve Jobs and Microsoft Corp. co-founder Bill Gates shared a stage in front of scores of reporters.

The jury is still out on Apple TV, though. Phillip Swann, president of TVPredictions.com, said: "It will bomb, and everyone knows it will bomb." But UBS analyst Ben Reitzes said Apple TV "could be considered as a DVD replacement" and that the product along with other Apple video initiatives "are the key to driving momentum long term" for Apple.

Reitzes has a $133 price target on Apple, which closed the month at $121.19, up 21.4%.

While at the conference, Jobs called Apple TV "a hobby" for the company, but also said he sees it as a "DVD player for the Internet."

That's a lot like what TiVo Inc. is turning its set-top box into via partnerships with lots of Internet sites, though not including YouTube. TiVo bounced wildly last month, spurred by the report of the company's first-ever quarterly profit along with some downgrades and upgrades, finally settling in with a 2.5% loss.

Amazon.com Inc., whose Unbox digital movie/TV show partnership with TiVo takes aim at Apple TV, saw its shares gain 12.7% on the month. They're up 75.2% so far this year.

RealNetworks shares gained 12.2% last month. The company said it will introduce a new player that will allow for the downloading and storage of Internet video, including YouTube films.

YouTube's parent, Google Inc., saw its shares rise 5.6% during the month to $497.91.

Google was one of many presenters at the Goldman Sachs Global Internet Conference. Google said it has "many engineering projects that they want to explore but do not currently have the manpower to do so and thus aggressive hiring will likely continue," according to Goldman Sachs, which has a $620 target price on Google shares.

VeriSign's 9.1% rise last month to $29.83 was in part because of the resignation of CEO and chairman Stratton Sclavos.

"While no reason for Sclavos' exodus was given, it appears that Sclavos is going to be the fall guy for the ongoing stock-option pricing debacle at VeriSign," ThinkEquity Partners analyst Jonathan Hoopes said.

While Hoopes wonders "if there is yet another shoe to drop" and lowered his price target to $25, First Analysis Securities Corp. analyst Lawrence Berlin was upbeat. "Any success in reorganizing could lead to improved stock performance," he said.

Take-Two shares outperformed most video game stocks, rising 7.4%. Shares of Electronic Arts Inc. fell 3.1% and Activision Inc. fell slightly.

Other losers on the month included Napster Inc., down 7.6%, and Netflix Inc., off 1.2%. The latter's primary competition, Blockbuster Inc., saw its shares sink 28.7%, wiping out all its gains for the year and more.
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