NetCurrents (fka NTCS)

[PappaJohn]

How Oracle Avoided Getting Emulexed

Editor: Luciano Siracusano (11/3/00)

One of the more interesting stories from Thursday's trading involved the washing and rinsing of Oracle (NASDAQ: ORCL - Quotes, News, Boards).
Oracle's stock came under attack when rumors circulated that the company was heading for some operating headaches and that senior executives of the software maker may soon be resigning.

At 11:12 Eastern Time on Thursday morning, with the stock already down $1.56 on heavy volume, Briefing.com, a provider of market commentary, reported on its Web site that Oracle was "in play." Briefing.com, which is in touch with Wall Street trading desks in real time, reported that rumors were spreading about both the health of its applications software business and the possibility that Oracle's chief financial officer, Jeff Henley, would soon resign.

At 11:18 a.m., similar musings surfaced at theflyonthewall.com, another subscription-based source of trading "buzz" on the Internet.

Once the cable networks reported the unusual activity in Oracle's stock to television audiences, additional rumors quickly ricocheted across heavily trafficked message boards throughout cyberspace. Oracle's stock, which opened at $32.44, was in freefall by 11:30 a.m., falling nearly 16% to $27.25.

While Wall Street trading desks were vibrating, on the other side of the country a small team of Internet intelligence analysts at NetCurrents (NASDAQ: NTCS - Quotes, News, Boards), a small Los Angeles-based concern, were huddling, deciphering data supplied to them by revolutionary software that scours the Internet in real time for information about particular companies.

NetCurrents owns this proprietary software and uses it to see who is trash-talking its clients on message boards and Web sites around the world. It does this as a premium service for its customers. NetCurrents also has an exclusive alliance with Kroll Risk Consulting Services, a division of Kroll-O'Gara (NASDAQ: KROG - Quotes, News, Boards), a company that conducts investigations for multinational corporations.

Oracle is one of NetCurrents' clients.

Within two minutes after the second post appeared on theflyonthewall.com, NetCurrents alerted Oracle about the specific content of the rumor. Oracle then moved quickly to nip the bad information in the bud.

Messages were quickly relayed to the trading desks at Morgan Stanley Dean Witter and Goldman Sachs that the resignation rumors were not true.

Briefing.com, which had been in contact with the trading desks, soon thereafter reported that denial on its site at 12:09 p.m., with Oracle's stock trading at around $29.

At the same time, Oracle's press office was quelling rumors by speaking to reporters directly.

And at 12:36 p.m., a Reuters news service story appeared on the Internet, quoting company spokespersons saying that the rumors about executive resignations were categorically false.

The stock stabilized and recovered later in the day from the depressed morning levels.

Friday, analysts were defending the stock. Lehman Brothers said the sell-off provoked by the rumors had created a buying opportunity in Oracle's shares.

NetCurrents, which is due to report quarterly results next week, sees a large market opportunity for its technology, as companies come to grips with the reality that information published on the Internet can have deleterious consequences for their products, corporate reputations and stock prices.

NetCurrents is expanding its customer base and intends to target the legal community as well. Both class-action lawyers and legal firms defending clients from such suits have use for NetCurrents' solutions.

Although the company is still in its infancy, its business model shows promise, especially if management succeeds in transforming the company into a software concern that can generate 65% to 70% gross margins, fueled by recurring revenue streams from global partners.

According to NetCurrents, it was actually talking to Emulex (NASDAQ: EMLX - Quotes, News, Boards) shortly before the infamous "Emulex stock hoax" rocked that high-tech company. Those discussions alone, however, were not enough to save that high-flying stock from gyrating to the whims of an allegedly heavily leveraged student.

Going forward, companies may realize that NetCurrents offers the best protection against getting "Emulexed" in the future.

Bottom Line:

At a recent price of $1, NetCurrents shares are way off their 52-week high. Although we continue to believe that this equity is best suited for speculative accounts, we suggest investors take a fresh look at the company's progress after it reports in November.


http://www.individualinvestor.com