Internet hacker attacks usually result in two things: Lots of
hyperventilated media coverage and a run-up in ‘Net security stocks.
That’s why some investors who hoped to cash in right away on last week’s “I
Love You” e-mail virus might feel about as lucky as the Filipino suspect
arrested in Manila over the weekend.
Through early-afternoon trading Monday, nearly every security stock was
down, along with the Nasdaq, which was off nearly 2.5 percent by 1 p.m.
Firewall market leader Check Point Software
and Secure Computing both were down 4.5
percent early Monday afternoon, while WatchGuard Technologies
fallen 8.6 percent. All four sell products designed to protect computers and
networks from unwanted intrusions.
Other security companies also have seen their stocks slide by Monday
afternoon, including VeriSign
and Entrust Technologies
which were down 3.4 percent, 4.8 percent and 1.7 percent, respectively.
The market’s lack of fervor for security stocks in the immediate aftermath
of what may be the most damaging and costly e-mail virus ever distributed on
the ‘Net stands in sharp contrast to the feeding frenzy among investors in
February, after hacker attacks on major Web sites worldwide.
What’s the difference between then and now? For one thing, many momentum
investors have been knocked out of the game in the past month due to
widespread margin calls in late March and early April.
But it also could be that the spring correction, at least in the short-term,
has made investors less impulsive and more focused on the long-term. Which
means fewer investors are rushing to log onto E*Trade
or call their broker in response to every banner headline and breathless
news report about anything to do with the Internet.
In the long-term this mentality bodes well for Internet stocks, since it
helps keep froth and speculation to a minimum. But given the innate nature
of investors, don’t bet on this outbreak of rationality to last for long.