Can Watermarking Save Others From Emulex Hoax?

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August 31, 2000 (10:44 AM EDT)

Can Watermarking Save Others From Emulex Hoax?

It may be too late for Emulex Corp. to benefit from electronic watermarking. But other companies may take advantage of the technology for authenticating documents that's expected to hit the market soon.

The data network equipment maker Emulex (stock: EMLX) was victimized last week when Internet Wire unwittingly posted a fraudulent news release, submitted by someone claiming to be a company rep. The release said that the company's CEO had resigned, that its fourth-quarter 1999 earnings would be restated, and that it was being investigated by the SEC -- all of which led to a serious drop in the company's stock price.

The FBI arrested a suspect in the case on Thursday.

An Emulex rep said the company is exploring every avenue to make sure this situation isn't repeated. But she also admitted that if someone wants to put out fraudulent news releases, "they're going to find a way to do it."

And that's where Blue Spike Inc., hopes to make its mark: The company is planning to release a product in the next 90 days that could help prevent similar hoaxes.

Blue Spike already produces digital watermarking technologies for video and audio files and is now developing a technology that would make it possible for Internet Wire and others to verify the electronic text documents they receive. VP Gregg Moskowitz said the product will let Internet Wire distribute a decoder to companies that use its service, thereby allowing it to verify the origins of news releases.

But Internet Wire CEO Michael Terpin says that the wire service shouldn't depend on technology to do the job of the wire service. The fraudulent posting was achieved only when the perpetrator convinced Internet Wire's night shift that the release had already been approved for posting by the day crew, Terpin said. It was a simple con job, he added.

About one out of 50,000 releases turns out to be fraudulent, so the real issue is that "we shouldn't rely on technology instead of good old-fashioned follow-up," Terpin said.