Last spring's "correction" in Internet stocks, which prompted proclamations that the excess air had finally been let out of Wall Street's bubble, is rapidly being replaced by a revived and refocused enthusiasm for technology stocks.

Led by a new cadre of Internet infrastructure and telecommunications companies, tech stocks are not only recovering the losses they took in May and June but in many cases are hitting all-time highs.

In the past week record prices were set for more than a dozen Washington area stocks, including AppNet Systems Inc., MicroStrategy Inc., Omnipoint Corp., Proxicom Inc., Aether Systems Inc, Cysive Inc., USinternetworking Inc., Nextel Communications Inc., Transaction Network Services Inc., Visual Networks Inc., Axent Technologies Inc., Primus Telecommunications Group Inc., Micros Systems Inc. and Integral Systems Inc.

These issues, nearly all traded on the Nasdaq Stock Market, helped push the Nasdaq composite index past 3,000 last week for the first time, a benchmark more indicative of overall stock market performance than the 10,000 mark crossed by the Dow Jones industrial average.

"This is a Web-driven market, an Internet-driven market," said Doug Schmidt, a top technology investment banker at Legg Mason Wood Walker Inc.

The success of stocks such as Cysive and USinternetworking shows investors are looking at the Internet not only as an opportunity for revolutionary kinds of new businesses like online retailing, but as a revolution in the way many businesses operate, Schmidt said.

Cysive specializes in taking companies online -- and that means more than just building a World Wide Web site, Schmidt said. "If you're doing it right, like Cysive is, you are changing the whole character of your business, from the Web site to the back office -- you're changing the flow and the structure of the business."

"Internet infrastructure companies are absolutely on fire," said Ken Berents, research director at Wheat First Butcher Singer Inc., which helped underwrite Cysive's initial public offering.

"Some people believe we're in a once-in-a-lifetime shift to a new economy, propelled by the Internet," Berents said. "There's a sense that the Internet is going to change how people live and how they do business."

Because Internet innovations are happening so rapidly, the list of hot Net stocks turns over as fast as the top songs of the week on MTV.

The area stocks listed in the chart that recently have scored the biggest gains are not the same ones that led the pack during last spring's outbreak of Internet mania. Though they have also scored big gains, the stocks of America Online Inc., PSINet Inc. and TeleBanc Financial Corp. still are below their spring peaks.

Many of the Net's best known national brands, among them eBay, Amazon.com and Yahoo, also are lagging behind the leaders. Because these stocks make up a big part of the popular indexes used to track the Internet industry, the strength of the recent rebound is understated by many widely quoted benchmarks.

Ironically, these Internet blue chips seem to be lagging precisely because they have outgrown their roles as rookies -- evaluated as much on their potential as on their performance.

Now that analysts can see that Amazon's sales per customer are declining as the size of its customer base grows and how much eBay is spending on hardware to keep up with its growth, they are factoring those numbers into their investment decisions.

The idea that growth is more important than profits also is coming into question, as investors realize that they may have to wait longer than expected for rapidly expanding revenues to result in earnings.

But younger companies, which can legitimately plead that profit expectations are premature, still are generating spectacular stock prices based on the appeal of their ideas. At the same time, however, some of the newly popular Internet infrastructure companies are defying the rule of perpetual losses by pursuing business plans that quickly put them in the black.

Another difference between the current tech stock rally and the previous one is the growing role of telecommunications stocks, which pretty much sat out the spring season.

This time around, the top-performing Washington tech stocks include Omnipoint Corp. and Nextel Communications Inc., both mobile phone services; LCC International Inc., which designs telecommunications networks; Primus Telecommunications Corp., a long-distance and data provider; and Teligent Inc., which provides wireless phone and data services to office buildings. Teligent's stock jumped $15 a share on Friday to $63.87 1/2 after it was announced that a group led by Microsoft Corp. had invested $500 million in the company.

While the recent run-up in technology stocks has revived enthusiasm for the Internet, it also has reopened the debate as to whether Net stocks are inflated -- the bubble theory sometimes cited as the cause of the sharp decline in tech stocks last spring.

If Internet stocks were overpriced before the "correction," why are they going so high again?

A better question, suggests Ulrich Weil, the top technology analysts at Friedman, Billings Ramsey Group Inc., is why Net stocks tanked so badly last spring. "The souring on tech stocks came out of nowhere," he said. "The feeling was tech stocks, having had such a long run, were bound to have to give some of it up."

Last spring people were questioning whether tech stocks were overvalued, he added. "Now we're right back again and nobody asks questions."

Weil, Berents and Schmidt all agree on two characteristics of the recent rebound: It is by no means universal, benefiting only a small group of Internet and telecom companies; and it is both a symptom and a cause of the stock market's increased volatility.

Information services companies that do not concentrate on Internet work have missed out on the recent rally. The firms are suffering because of the combined impact of the Internet and the year 2000 computer glitch, Schmidt said.

Based on glowing projections for Christmas sales, the outlook for both the Internet infrastructure companies and Internet retailers is strong through the end of the year, the three local tech mavens agree, but that does not mean Net stocks won't gyrate.

"The volatility in the market is going to be higher than ever," Berents said. "People really believe in the Internet and this new economy, but you're going to see volatility in these stocks continue."

The big wild card for tech stocks through the end of the year could be the Microsoft antitrust case, Weill said Friday, before the decision in the case was announced. A federal judge later said Microsoft holds a "monopoly power" of rivals, which hinders innovation and hurts consumers. "A catalyst of that nature could trigger a move in either direction," Weill said.

Up and Away

Washington area technology stocks have rebounded nicely since a "correction" in the market earlier this year.

Stock Recent Low (Date) Friday's close % change

AppNet $8.68 3/4 (June 24) $54 521%

Microstrategy $17.25 (May 16) $95.87 1/2 456%

Omnipoint $16.25 (May 6) $83.43 3/4 423%

Communications

Proxicom $18.25 (May 10) $85.18 3/4 367%

Aether Systems $16.00* (Oct. 25) $66 312%

Cysive $17.00* (Oct. 15) $60 252%

USInternetworking $14.62 1/2 (Aug. 30) $48.25 229%

LCC International $4.12 1/2 (May 7) $13.18 3/4 219%

Nextel $34.62 1/2 (May 27) $91.25 164%

Network Solutions $51.75 (June 4) $142.87 1/2 176%

Transaction $22.87 1/2 (May 20) $44.50 94%

Network Services

Visual Networks $26.38 3/4 (June 28) $48.37 1/2 84%

Axent Technologies $9.06 1/4 (May 5) $17.38 3/4 92%

Primus $14.31 1/4 (May 7) $27.50 76%

Telecommunications

Ciena $24.18 3/4 (March 16) $43 3/4 81%

America Online $82.68 3/4 (Sept. 20) $145.50 76%

Micros Systems $30.53 1/8 (May 5) $52.31 1/4 71%

Telebanc Financial $21.12 1/2 (Sept. 17) $30.87 1/2 46%

Integral Systems $19.43 3/4 (May 17) $29.62 1/2 52%

PSI Net $32.00 (Oct. 19) $45.18 3/4 47%

* Gains from IPO

SOURCE: Bloomberg News