Site Outages At Ameritrade
The Web site of electronic brokerage Ameritrade suffered an outage Thursday morning, eliciting cries of distress from dissatisfied customers and sending the company's stock off more than 8 percent.
According to message boards on Yahoo! and Silicon Investor, Ameritrade (AMTD) customers have been experiencing problems off and on since the beginning of the month. Wrote one investor going by the name "BWAC" on Silicon Investor: "Well I got the 'system down' message at 10:30 Eastern this morning. Still down as of 11:08. I hate this company with a passion."
Later messages reported that Ameritrade's site was back up and running, which was confirmed by a company spokesperson. The spokesperson, who wished to remain anonymous, also confirmed the outage, blaming it on a software problem the company has faced since the spring.
According to the spokesperson, software that connects the Web site to the trade execution process that Ameritrade built in-house was also causing problems earlier this year.According to Piper Jaffray Internet analyst Steve Franco, Ameritrade is scheduled to replace the in-house software with a program from BEA Systems by Sept. 18.
"Due to their limited nature, we do not expect these problems to materially impact Ameritrade's near-term financial results," Franco wrote in a research report Wednesday. "The company does risk increased customer turnover and a spotty service record if it does not fix these problems ahead of its major marketing push [scheduled for early October]."
Franco, noting that the company is still on target to top 300,000 customer accounts by the end of September, maintained his "strong buy" rating and $27 target price.
John Robb, principal at Gomez Advisors, said part of the problem could result from the fact that Ameritrade is headquartered in Omaha, Neb., where finding technical help is difficult.
"Brokerage sites are by far the most complex in the e-commerce area," Robb said. Gomez rated Ameritrade No. 11 in its latest survey.
Unlike in October 1997, whe all online brokers - and traditional brokers as well - appeared unable to handle the heavy surge in trading, recent problems seem to be isolated at fewer firms. Aside from Ameritrade, Waterhouse Securities also appears to have gone down on Thursday, according to customers writing on Internet bulletin boards.
Several Ameritrade customers mentioned the company's multimillion-dollar advertising campaign, which highlights the service's $8 commission on online trades as well as the company's status as "the first to trade on the Internet," in their message-board complaints.
"All online brokers have problems from time to time, but I find Ameritrade's absolutely unacceptable. ... [T]hey are a public company, spending a fortune on advertising, but then not delivering on their promise of fast executions and efficient online service. So as they add customers, the system gets worse," wrote Yahoo! message-board user "Cruismeister" last week.
Robb agreed that Ameritrade's marketing has outperformed its technology but added that the company "is well-run, and I'm sure they're probably going to find some solution."
Other investors expressed frustration at public comments from Ameritrade's chief executive, Joe Ricketts, who played down the complaints on a recent interview on CNBC, saying "it really is quite startling for us to see trades jump that much and have everything work that smoothly."
The Ameritrade spokesperson said Ricketts has been forthright about the company's server problems.
Shares of Ameritrade fell 1 to 16 5/8 Thursday. The stock hit a 52-week high of 26 13/16 in late July.
Written By Darren Chervitz