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HolidayBuyer's Guide
Tech Industry

eToys jumps on Wal-Mart Web delay

EToys (Nasdaq: ETYS) has one less real-world retailer to worry about for the holidays. EToys shares surged 10 percent on news that Wal-Mart (NYSE: WMT) would delay the launch of its revamped website until Jan. 1.

In afternoon trading, eToys was up 6 11/16 to 75 5/16.

On Thursday, Wal-Mart said it will beef up its existing store for the holidays and launch its personalized revamped store at the beginning of the year. Analysts had expected Wal-Mart to give eToys, Amazon.com (Nasdaq: AMZN) and other e-tailers some competition for the holidays with its revamped store.

"We continue to believe that into next year and beyond, the leading online retailers will be able to compete very effectively with land based retailers adopting a hybrid strategy," said Henry Blodget, an analyst with Merrill Lynch.

The new Wal-Mart.com store, featuring numerous personal shopping aids, a travel service and photo center, will be tested by Wal-Mart associates for launch in January.

"This is a journey for us, not a race,'' said Glenn Habern, senior vice- president of new business development at Wal-Mart, in a statement. "There have been many that have speculated and placed expectations on our progress; however, we have remained focused on our customers and their expectations of us. Wal-Mart.com's new store is being designed with them in mind.''

Analysts said the Wal-Mart delay shows e-commerce is harder than it looks.

"Some investors are still concerned that Wal-Mart's entry into the online retailing game will put pressure on the leading online retailers, such as Amazon.com, barnesandnoble.com (Nasdaq: BNBN) and eToys," said Blodget. " We continue to believe that Wal-Mart will face significant challenges in building a strong online business and think that the leading online retailers will in any case hold their own (the weaker ones will get crushed, with or without Wal-Mart)."

Blodget said that adding more items isn't likely to dent the eToys and Amazon lead. He noted that Wal-Mart.com is currently ranked 44th among shopping websites, "approximately 30 points below such towering brands as 'Coolsavings.com'".

EToys shares have also gotten a lot of mileage out of Toys R Us' woes. Toys R Us has had a management shakeup and is struggling to revamp its Web operations.

Wit Capital analyst Ryan B. Alexander gave eToys its latest boost with an "outperform" rating on Tuesday. Alexander said eToys' recent surge was the only thing holding back a better rating.

"We have attempted to bridge the space between our overall level of enthusiasm for the company and the fact that its shares have appreciated approximately 50 percent in the last 30 days," said Alexander.