uyer beware: Internet buzz can sting if the frenzy is caused by bogus information. Emulex, a Nasdaq-listed tech company, learned this lesson firsthand. On Aug. 31, a 23-year-old college student was arrested by the FBI, accused of sending a deliberately false news release to an Internet news service. The release said Emulex was restating earnings reports to reflect a loss instead of a profit. It added that its CEO had abruptly resigned.
The release was picked up and disseminated by Internet Wire, Dow Jones Newswire and Bloomberg. Consequently, Emulex stock took a nose dive, losing more than $2 billion in market value before the fraud was discovered and the stock bounced back. As the stock fell, the young manipulator bought it at depressed prices. When the price of Emulex stock recovered, he sold it, reportedly making about $240,000. The scam not only shook Emulex but everyone who sold the stock as it plummeted—and by proxy, anyone who pays heed to Internet reports.
"Today you can create your own news and post it on the Internet," says Andrea Cunningham, CEO of Citigate Cunningham, a PR company based in Palo Alto, Calif., that specializes in high-tech clients. "Look at the Emulex incident. News is just [disseminated] now and goes right to the end user: Internet readers, viewers or listeners.
"I grew up with a journalism background thinking that the press is the great gatekeeper of truth, justice and the American way," she says. "The Internet has shot that idea full of holes." This realization puts PR shops, the news media and consumers at a disadvantage, argues Cunningham.
"Journalists and the public are much more cynical now," she says. "The Emulex story just adds to the problem, and there's a greater burden of proof on PR firms sending out news."
Jordan Chanofsky, CEO and founder of New York-based Fusion Public Relations, has a different view. "The Emulex incident impacts journalism more than the PR industry," he says.
"Certain well-established PR firms have good relations with wire services. The wire services know these PR firms send out accurate, reliable news releases. The new problem is that now people can emulate PR firms, and the media must ensure the accuracy and reliability of the information they receive."
The result? Skepticism of the press continues to grow, and "news" posted on the Internet and World Wide Web demands greater verification. Some industry experts believe this makes using online media more difficult for PR firms. Others, however, think the Emulex incident will prompt a new vigilance on the part of the electronic press.
Of course, the public must still be wary of chat rooms and rogue Web sites, where fabricated news can spread like wildfire.
"The Internet is a case of bad news, good news," says Robin Cohn, president of Robin Cohn & Co., a New York-based public relations firm specializing in crisis management. "The bad news is there's no control over what is said about a company. The good news is that in the event of a crisis, a company can provide information directly to the public without going through the media."
Agence France Presse/Newscom