Stocks to Watch: Ariba, 3Com, CMGI, Verity and Gateway

Look for a strong debut from Ariba Inc. (Nasdaq: ARBA), which on Tuesday priced its IPO above its previously expected range.

The maker of software for business buying will go public at $23 a share, lead underwriter Morgan Stanley Dean Witter said. Ariba had said it would price at $20 to $22 a share, a range that itself had been increased earlier this week from the original target of $16 to $18 a share.

The Wall Street Journal is reporting CMGI is in talks to purchase AltaVista and other Internet assets from Compaq Computer Corp. (NYSE: CPQ) for $2 billion to $3 billion in stock.

A deal could be announced as early as Thursday, according to people familiar with the situation, though talks could still break down, reported the Journal.

The online computer retailer posted a smaller-than-expected loss in its first quarter Tuesday, losing $8.9 million, or 38 cents a share, on sales of $32.7 million.

First Call consensus expected Cyberian Outpost to lose 40 cents a share.

The $32.7 million in sales represents a 183 percent jump versus the year-ago quarter when it lost $4.2 million, or 69 cents a share, on sales of $11.6 million.

Its Outpost.com site ended the quarter with 331,000 customers, up 18 percent from the fourth quarter.

Cyberian Outpost shares moved up to a 52-week high of 45 1/2 in November after falling to a low of 5 15/16 in September.

Four of the five analysts following the stock rate it a "strong buy."

First Call consensus expects it to lose $1.64 a share in the fiscal year.

While Compaq is looking to get out of the Internet business, Gateway is looking to get in it.

The Wall Street Journal is reporting that Gateway is preparing a bid for EarthLink Networks (Nasdaq: ELNK). Shares of EarthLink sent the sent shares soaring 20 percent Tuesday after CNBC broke the news.

According to the Journal, the talks are in the early stages and no price has been set. Long-distance provider Sprint owns slightly more than a quarter of EarthLink.

Manugistics topped analysts' estimates in its first quarter, earning $400,000, or 1 cent a share, on sales of $39.2 million.

First Call consensus predicted a loss of 4 cents a share in the quarter.

"We are turning the corner and are well positioned for the future," said Greg Owens, who became president and CEO of Manugistics two months ago. "Our positive performance reaffirms the confidence of our customers, employees and partners. ...We intend to move swiftly to energize the company by adding new talent, delivering enhanced solutions, and creating a world-class sales organization."

Investors expecting good news.

Shares of Manugistics gained 2 3/8 to 15 5/16 in trading prior to the earnings announcement.

3Com surprised Wall Street Tuesday when it reported better-than-expected sales and earnings in its fourth quarter. The network-equipment maker earned $87.5 million, or 24 cents a share, on sales of $1.41 billion.

First Call consensus pegged the Santa Clara, Calif. company for a profit of 23 cents a share in the quarter.

For the year, 3Com pocketed $403.9 million, or $1.09 a share, on sales of $5.8 billion. Last year, it earned only $30.2 million, or 8 cents a share, on sales of $5.4 billion.

3Com shares moved up to a 52-week high of 51 1/8 in December before falling to a low of 20 in April.

Its shares picked up ground last month on rumors that it might be a takeover target for either Lucent Technologies Inc. (NYSE: LU) or Ericsson AB (Nasdaq: ERICY).

Company officials also announced that it will repurchase up to 15 million shares of common stock.

Verity blew away analysts' estimates in its fourth quarter, earning $5 million, or 34 cents a share, on sales of $19.3 million. Its shares closed off 1 7/8 to 45 7/8.

First Call consensus expected Verity to earn 25 cents a share in the quarter.

The $19.3 million in sales represents a 15 percent improvement versus the year-ago quarter when it earned $1 million, or 8 cents a share, on sales of $16.7 million.

In the quarter, software sales accounted for 75 percent of the company's total sales in the quarter, roughly $14.5 million.

For the year, Verity made $12.1 million, or 88 cents a share, on sales of $64.4 million compared to a loss of $16.5 million, or $1.47 a share, on sales of $38.9 million last year.

All five analysts following the stock maintain a "strong buy" recommendation.