Technology Couldn't Have Protected Emulex--At Least, Not Yet

It's a bit late for Emulex Corp., but electronic watermarking technologies for authenticating documents could hit the market soon. Even so, the head of the wire service that unwittingly posted a fraudulent Emulex news release says technology is not the answer for preventing such occurrences.

Last week, Emulex, a data network equipment maker in Costa Mesa, Calif., was victimized when Internet Wire posted a release submitted by an unknown perpetrator claiming to be a representative of the company. The release, which stated that the company's CEO had resigned, that its fourth-quarter 1999 earnings would be restated, and that it was being investigated by the Securities and Exchange Commission, resulted in a significant drop in Emulex's stock price. An Emulex spokeswoman says the company is exploring every avenue to make sure the situation doesn't repeat itself, but she admitted that if someone wants to put out fraudulent news releases, "they're going to find a way to do it."

Blue Spike Inc. expects to release a product in the next 90 days that could help prevent such occurrences. The company, which already produces digital watermarking technologies for video and audio files, is developing technology that would make it possible for Internet Wire and others to verify that the electronic text documents they receive are authentic. Blue Spike VP Gregg Moskowitz says the product will let Internet Wire distribute a decoder to companies that use its service, thereby enabling it to verify the origins of news releases.

But Internet Wire CEO Michael Terpin says that depending on such technologies would only make news organizations complacent. Terpin says the fraudulent posting, which was achieved when the perpetrator convinced Internet Wire's night-shift personnel that the release had already been approved for posting by the day crew, was a simple con job that technology couldn't have stopped. Besides, he says, only about one out of 50,000 releases turns out to be fraudulent. Says Terpin, "We shouldn't rely on technology instead of a good old-fashioned follow-up."