NEW YORK -- A network equipment maker's stock plummeted by more than 60 percent after financial news agencies picked up a bogus Internet news release on the company's earnings and personnel changes. Shares of Emulex later recovered when the company denied the reports.
The shares plunged Friday to $43 from their previous close of $113.063 after the false news circulated that the California-based company was restating its earnings, its CEO had quit and it was under investigation by the Securities and Exchange Commission.
"You'd like to think that all you need to do is continue to focus on your business, but unfortunately from time to time something like this happens," said Paul Folino, president and CEO of Emulex.
The information originated on Internet Wire, a 6-year-old online distributor of press releases. CEO Mike Terpin said the hoax was perpetrated by someone claiming to be with a public relations agency representing Emulex.
"Internet Wire deeply regrets that this incident has occurred and for any problems or confusion it has caused for Emulex, the company's investors and the market place in general," Terpin said in a statement.
Trading in Emulex's stock was halted at midmorning on the Nasdaq Stock Market but resumed in the early afternoon after the company refuted the reports. The stock closed at $105.75 in regular trading, down $7.313 for the day.
Emulex executives say they were cooperating with authorities in investigating the matter.
Visibly annoyed by the events, Folino called the episode a lesson for investors "to just be cautious in what you look at and do your homework before you react."
The incident also raised new concerns about the accuracy of information distributed via the Internet. Other companies have also seen their stocks manipulated by false information disseminated online.
Lucent Technologies' shares fell 4 percent in late March after a fake news release was posted on an Internet bulletin board saying that Lucent would report lower earnings. In April of last year PairGain Technologies's stock jumped more than 30 percent after a former employee duped investors with a fake Internet news story saying the company was about be taken over.
The Associated Press did not run stories based on Friday's fake release, but other financial news wires did.
Matt Winkler, the editor-in-chief at Bloomberg, said his agency should have been more careful in how it handled the story.
Rick Stine, the managing editor of Dow Jones News Services, said he wanted to know "if some sort of safeguard was dropped, if it was human error" on the part of Internet Wire.
"Until we hear something from them that makes us feel more comfortable, we're going to call every company to verify any press release we receive from them," Stine said.
Internet Wire says on its Web site that it serves more than 2,500 clients including more than 300 public relations firms and is backed by two of Silicon Valley's hottest venture capital firms -- Sequoia Capital and Hummer Winblad Venture Partners.
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