2HRS2GO: Is the hype back for Internet stocks?

Have electronic books suddenly become preferred vehicles of reading?

Shares of Barnesandnoble.com (Nasdaq: BNBN) rose 1 15/32 to 5 7/32 so far today, on volume of more than 4 million in the first four and half hours of trading, following reports that the company would team with Microsoft (Nasdaq: MSFT) to sell digital books online.

Have any of these BNBN buyers ever tried books on a computer screen? I didn't find it a great experience -- I downloaded a couple of Gutenberg Project books for something to do when I was called for jury duty last year.

(No, not to read during trials. But here's the reality for many would-be jurors: you sit around all morning to wait for a court call that never comes. I reported to a court building that happens to be three or four blocks from ZDNet's office; I brought my laptop to the jury waiting room so I could just walk to work in the afternoon).

Gutenberg converts public domain books into plain text files and puts them on the Internet. The characters aren't as difficult to read as some folks have suggested, but the problem with digital books never has been the readability so much as the physical shortcomings.

They're not as totable as a paperback or even a hardcover. You can't write on the pages. Most irritating to me, you can't quickly tell how far you are into the book. Yes, any word processing program will tell you what page you're on, but it's not the same thing as glancing at a book so you can "feel", if you will, how far you have to go.

Granted, the new online store apparently will also provide single copies printed on demand. That might be useful for rare books, but if these books were significant revenue generators, they wouldn't be rare in the first place.

And if you need a popular book right away -- presumably speed is a main appeal, otherwise you'd just order the book online and wait for mail delivery -- why not go to a real store to buy a real hardcover or softcover, instead of printing out your own version?

Not that a bookstore for digital books is a bad idea. I'm sure it has possibilities, and it probably couldn't hurt. But does it make Barnesandnoble.com worth 40 percent more than it was worth Friday? I don't see how.

Six months ago I wouldn't have been surprised to see BNBN shoot higher on something like this. But the recent malaise affecting all Internet stocks seemed to put a damper on announcement-driven stock spikes. And Barnesandnoble.com missed second quarter estimates not so long ago.

So perhaps this is a sign that Internet sentiment is finally coming back.

An even clearer signal might have come this morning from that favorite target of hotshot Web traders, Merrill Lynch analyst Henry Blodget. He's famous for calling the $400 price target on Amazon.com (Nasdaq: AMZN), but in retrospect that marked the final push toward a ceiling -- the stock peaked a couple of months after Blodget's AMZN call and has gradually ever fallen since.

Now Blodget has downgraded several of his companies, including Barnesandnoble.com, which was cut to Merrill's equivalent of "near-term neutral" from "near-term accumulate". Blodget says the ratings changes aren't a change in sentiment, but rather a better way to distinguish different stocks in his coverage realm.

However, he does see something of a floor.

"We believe that sector volatility will continue (i.e., that we will continue to see, to some extent, continued seasonal strength and weakness in trading levels)," Blodget writes. "The timing of this reset relative to the current stock prices is, again, not a prediction of further weakness. In fact, we believe that many of the stronger stocks may be near seasonal bottoms."

Sure, the guy's a bull and he's going to talk up his sector. But he has been pretty good at predicting a top, so why not a bottom?

Anyway, Barnesandnoble.com as a "neutral" doesn't seem to qualify as one of his "stronger stocks". Yet we all know it'll probably survive, if only for the reason that it's backed by the biggest bricks-and-mortar book retailer in North America. Most e-tailing stocks might disappear, but BNBN isn't likely to be one of them.

In other words, market hype and sentiment will never return for most Web stocks. But it might be coming back for the ones perceived as survivors. 22GO>