excellent post from rb:
By: galimatias
Reply To: None Tuesday, 1 Feb 2000 at 1:16 PM EST
Post # of 194252
Ms. Karen Winner
Editor, San Diego Union Tribune
February 1, 2000
Please excuse me if you are not the executive editor of the Union Tribune and therefore the wrong person to whom I should address this letter.
The cover story of the Sunday paper (January 30, 2000) about e Digital Corporation raised concerns for me about the 1) motive for the story and 2) professionalism and fair treatment.
Motive: I believe the overt motive was to convey to your readership that some stocks are more hype than their market capitalization justifies. And that this hype is fueled on investor chat boards. Okay, fine. Before one sets out to establish such a point with only one company (rather than treat the many such cases out there who cannot even claim assets like a patented technology), I think it's a wise move to see what all the commmotion is about.
Thomas Kupper comes up seriously short here when discussing Edigital's MicroOS. That raises flags about his negative diatribe. He made glaring omissions, among them a rather key point: that MicroOS is a patented technology. Lucent Technologies, Intel, IBM, Texas Instruments, Sand Disk, Lanier, Rio, Liquid Audio, to name a few, all have come to e Digital for the piece they need to be successful in the market place. Why? Because e Digital has the key to interoperability in music audio devices (among other things they have). Why would a former Intel VP sit on the board of directors of this "tiny" company? Without boring you with a lengthy explanation, let me say only that if these companies could do without edigital's piece, believe me, in the dog-eat-dog world of corporate competition, they would. E Digital was invited--unsolicited--to speak at the US-Japan Telecommunications Research Institute late last year on hand held devices. Take a look sometime at the membership: every major high-tech/electronics corporation in the world belongs to it.
Professionalism: What Thomas Kupper did instead of thorough research and a company visit was to attack the company as nothing but internet hype, spawned by a vast group of misinformed company cultists whose deliberate purpose was to raise the share price by persuading others to buy shares and by hyping the stock all over the internet. He says that the company "touts" its relationships with the likes of Lucent, throws parties at trade shows, and he implies that it thrives on pulling the proverbial wool over investor eyes as it makes empty promises. Of all things, he should have stuck to blasting their bottom line than raise the issue of integrity.
If Thomas Kupper was as interested in the facts as he is in his own point of view, he might have gone to the web and looked through the company's press releases. Bound by non-disclosure agreements, e Digital has played it frustratingly close to the chest and has let months go by with nary a whisper. He might also have clicked on any financial site. Why did Fidelity Investments last year rate e Digital a "Strong Buy" among 9 of 12 analysts, 2 a "Buy," and one a "Hold?" Hype? When it was $1.70 a share? Is that behemoth investment company of Boston risking its reputation to fuel internet psychosis over a bulletin board issue?
I'm waging that Thomas Kupper did not speak to CEO Fred Falk nor to VP Robert Putnam. He spelled Putnam's name incorrectly ("Putname"), an inexcusable error in a cover story which, after all, requires the support of facts. Didn't he get a business card? My guess is he instead saw one of the several web cast interviews, which allowed him to say Putnam "shrugged" at the notion of e Digital having such a large market cap. Had he visited the company and actually reported a "shrug" in reponse to one of his questions, I suspect we would have more direct quotations and that he would have come home more enlightened about what it is the company does. Not to have spoken directly to the company he was intent on levelling is shoddy journalism and does not, at least among the business community, inspire confidence in your newspaper.
Tune in: there's something out there called the internet. News travels FAST. Somebody finds out about a technology, researches it, begins sharing that information with others and the snowball begins rolling. Of course such chat boards eventually draw everything out from dark corners and cracks in the floor, but the point is that just because a discussion broadens does not mean the essential premise for it is null and void. In the case of e Digital, the story is now a full year old. All of last year avid investors shared information on this company--the kind of investors who themselves are CFOs, engineers, MBAs, everything inbetween, and at-home moms and dads.
Why, in a word, did the stock go up so sharply in January? That was essentially the underlying question of Kupper's piece. Instead of answering it, he chose what seemed to him the only possible explanation: hype. Every success story draws hypesters; it's up to journalist to dig for the truth. Real answer: The company that exasperated investors with its dearth of news finally issued news THROUGH ITS CUSTOMERS that its reference design for music players was being used by, among others, IBM, alongside IBM's revolutionary micro-drive. Validation of the company's design by a big player had come. There's more to follow. If we can believe Intel, much more.
There are too many parts of this story to convey in a letter. My chief purpose is to write and condemn this kind of high school journalism, guilty of the very hyping sin it condemns. We all know stories can be written any way one chooses by manipulation of facts. That's hype. Leave some out and include everything from the "right" pile. Research was key here, just to make sure Kupper's own attitude was adequately informed before committed to paper. The danger, of course, is that while Kupper's fundamentals are correct at the dust level, he's entirely wrong when it comes to looking through the glass. The share price has only begun to bear this out.
--galimatias
(Voluntary Disclosure: Position- Long)
|
