The study, which was conducted among 1,630 online households including 857 online investors, said that online investors "appear to be infatuated with Internet stocks."

Nearly three-quarters of all online investors who have ever purchased an Internet stock continue to own one or more Internet stocks - representing 23 percent of their entire investment portfolio measured in dollars, or an average of $38,000.

Generally, online investors gravitate toward the stocks of the largest and most well known Internet companies.

The percentage of all online investors owning the following Internet stocks are: America Online (38 percent); Yahoo (17 percent); Amazon (15 percent); eBay (11 percent); Cisco (5 percent); Excite (4 percent); Lycos (4 percent); CMGI (3 percent); Microsoft (3 percent); and Barnes & Noble (3 percent).

The authors said that the general investing population and online investors tend to prefer the same Internet stocks.

NFO Interactive is on the Web at http://www.nfow.com

Spectrem Group is on the Web at http://www.spectrem.com

Online Brokerages
$3 Trillion In Assets By 2003

By Bob Woods

The online brokerage segment of the financial services market may be flush in cash by 2003, but it may leave a trail of angry customers in the process, according to a new study from Internet research firm Jupiter Communications.

Online brokerages will have $3 trillion in assets under management by 2003, according to the new research from Jupiter. At the end of 1998, such firms had $415 billion in assets, the company also said.

The "assets under management" figure is important because "it relates to the ability of brokerage houses and others entering the financial space to be profitable in an era of lower per-customer transactions," said Robert Sterling, an analyst with Jupiter's Digital Commerce Strategies, during an afternoon conference call attended by Newsbytes.

"As the average net investor becomes a person of lower income and lower risk tolerance," Sterling said, "we feel the ability of firms to capture assets and to become the primary repository of investors' assets is an extremely important goal for them to pursue."

Only 39 percent of financial services Websites responded to customer e-mail inquiries within one day in the second quarter of 1999 - inadequate for such a service-intensive business, Jupiter said. Additionally, almost 25 percent of firms never responded to e-mail inquiries in the quarter, Sterling also said.

By comparison, 64 percent of retail shopping sites responded to e-mails within a day.

Jupiter said the second-quarter figure is an improvement over the first quarter of 1999, when financial services sites had a 24 percent one-day response rate and retail shopping sites had a 26 percent rate.

Customer service is a very serious issue, Sterling said, and online brokerages "have to address this if they want to continue to grow assets."

"The firms that are able to present competent customer service to their prospects and their customers, and are able to gather assets, are the ones that'll be in the strongest position going forward," he also said.

Even with the customer service problems, Jupiter projects that households trading online will grow from 4.3 million in 1998 to more than 20.3 million in 2003.

Jupiter uses households rather than number of accounts to measure the size of the market because a household may have more than one account, Sterling said.

Also, 41 percent of US households holding stocks either directly or indirectly will have online trading accounts by 2003, and 30 percent of US banking households will manage their bank accounts online by 2003, Jupiter also said.

The online mortgage lending market is trickier to track and predict, because its success up to this point has depended on a favorable refinancing climate as much as on the borrowers' acceptance of the concept, Sterling said..

Because of this, Jupiter predicts that the number of online-originated mortgages could increase to 1.1 million and a total value of $155 billion in 2003, representing about 16 percent of all US mortgage origination, in a "best-case scenario."

In 1998, online mortgage origination was valued at $4 billion, Jupiter added.

Jupiter released its data today in advance of its Financial Services Forum, to be held Sept. 27 and 28 in San Francisco.

Jupiter Communications' Website is at http://www.jup.com .

Red Hat
Expands Into Japan

By staff

Linux software developer Red Hat has moved into the growing Japanese market by opening a new office.

Red Hat Japan will distribute the company's Red Hat Linux software and services directly to the Japanese marketplace.

The new operation will be managed by software industry veteran Masanobu Hirano, who has joined the firm as president of the Japanese business. Prior to joining Red Hat, Hirano was president of Hyperion Japan, a subsidiary of Hyperion Solutions, an online analytical processing (OLAP) "solution" vendor. He also served as vice president and was a board member of ASCII, one of Japan's pioneering computer software companies.

In other Red Hat news, direct sales computer maker Gateway has joined its authorized reseller program. Gateway customers will be able to request Red Hat's OS on its ALR servers for network business environments. Gateway's built-to-order ALR servers incorporate up to four Pentium III Xeon processors.

Red Hat is on the Web at http://www.redhat.com

QuotePower
Speeds Stock Info On Net

By Staff

QuotePower Information has upgraded its Internet-based financial news service through the installation of a new ATM (asynchronous transfer mode) backbone.

The firm is now capable of sending voice, video, data and images at 150 Mbps (megabits-per-second), compared to the previous rate of 2 Mbps.

The new system will mean users get high-speed access to the latest stock information in Hong Kong and the rest of Asia, and gives QuotePower the ability to add new content and interactive features.

By connecting its real-time quote system to the Internet via ATM, QuotePower can add more bandwidth at any time on demand.

More importantly, the added capacity means the firm can offer a broader range of new services based on voice and video transmission - such as live analyst conferences online.

QuotePower Information is on the Web at http://www.quotepower.com

Stock Hustlers
Moving to Net

By Tom Lowry

Stock hustlers shut down by regulators for deceiving investors are reincarnating themselves on the Internet. The attraction? Mass audience, low costs and perceived anonymity.

"We're seeing more of the alumni of these notorious boiler room operations migrating to the Internet," says Brooklyn federal prosecutor Joel Cohen.

Case in point: The Brooklyn U.S. Attorney charged four former brokers and executives of Stratton Oakmont with orchestrating a $5 million scheme to illegally promote eight stocks in mass e-mail and stories posted on a Web site. The Securities and Exchange Commission filed civil charges.

Regulators shut down Stratton Oakmont, a Long Island, N.Y., penny stock firm, in 1996 after years of disciplinary troubles. Three of the four people charged previously were barred from selling securities.

"By calling themselves promoters now, they believe they can get around their bars from the securities industry. But they are up to their old shenanigans," Cohen says.

In the past decade, penny stock firms that promote and sell inexpensive, thinly traded stocks have come under heavy scrutiny. They've been prosecuted for so-called pump-and-dump schemes, in which false information is put out about a company to boost its stock price so the penny stock firm's principals can profit on the run-up. When the stock plummets, the firm's clients lose big.

"Because of their histories, these brokers are essentially un-hirable and un-licensable. So they start newsletters or touting services on the Internet and strike deals with issuers of stock," says Indianapolis lawyer Mark Maddox, who represents investors who have been duped. "The Internet is giving them a new mechanism to mislead investors."

Federal prosecutors also are investigating the Internet activities of several former principals of Kensington Wells, a Long Island penny stock firm that closed in 1997. The probe comes a month after 13 of Kensington's executives were charged with stock fraud involving stock offerings while the firm was still in operation.

Other examples:

---Last fall, the SEC charged John Attalienti, a former research director at now-defunct Hibbard Brown and First Jersey Securities, with failing to disclose he was being paid by issuers of at least 10 stocks to promote the stocks on a Web site . He settled the case by agreeing to stop promoting the stocks and paying a $25,000 fine.

---In February, the SEC charged Scott Flynn with failing to disclose he received cash and stock to tout companies on a Web site and in e-mail. Flynn, who was convicted in Minnesota in 1998 on 13 counts of stock and wire fraud in an unrelated case, had worked for Barron Chase Securities, which has faced multiple disciplinary actions, and for Blinder Robinson, which regulators shut down.

Regulators Join To Stop Free Internet
Stock Scams

By Adam Creed

The Australian Securities and Investments Commission (ASIC) has joined with a US Securities and Exchange Commission campaign to put a stop to Internet-based free share offers.

In the past few months the FreeBanCo e-mail scam has been propagating on the Internet. The e-mail message offers recipients the chance to register for free shares in an Internet marketing company should it list. The virus-like nature of this latest chain e-mail has prompted regulators to take action.

What actually happens, ASIC suggests, is that the Website mentioned in the e-mail gets more page views from Net users tempted by the offer to log on, their personal information then gets stored or sold on to "spam" marketing promoters. The messages tempt recipients by reminding them of the great wealth earned by the lucky investors who got in on the ground floor of Yahoo! To keep the chain mail nature of the exercise moving FreeBanCo also offer a further credit of three shares for every person referred to it - recipients are urged to pass the e-mail on to their friends.

FreeBanCo or the Free Banner Exchange, describes itself as a marketing and advertising group that hosts banner advertisements for a variety of goods and services.

"A promise of share credits in a company that has not yet been incorporated and may never list publicly is a share in virtual unreality! said Tim Philipps, ASIC's director of electronic enforcement.

"Unless you are prepared for a bad case of spam in the future then do not give your personal e-mail address away - especially when you receive nothing in return," he added

E-Trade
Addresses Night Trading Worries

By James Kim and Matt Krantz

. The nation's second-largest online brokerage, E-Trade, joined the move Tuesday toward offering customers after-hours stock trading.

Starting in September, the brokerage will allow its 1.2 million customers to trade stocks until 6:30 p.m. ET via Instinet, a well-known stock execution company owned by Reuters. Traditionally, the stock market closes at 4 p.m. ET.

The move adds momentum to a trend that some say will ultimately allow people to trade stocks round the clock.

Other online brokerages also are planning after-hours services, including Charles Schwab, the No. 1 cyberbrokerage. Schwab has not announced when it will offer such trading. Datek, another big player, already offers extended trading hours through an electronic service called Island.

After-hours trading, though convenient and alluring to day-traders, is not without dangers.

"Anything that encourages too much short-term trading could be a bad thing," says Michael Farr of the money management firm Farr Miller & Washington.

Others say after-hours stock prices could be more volatile than what average investors are accustomed to, primarily because of fewer buyers.

"It could be a place where (stock) prices are marked up or marked down," says Kevin Haggerty, co-founder of Tradehard.com.

Still, Instinet is an established after-hours service, with good credibility among big professional Wall Street firms. Instinet's average daily after-hours trading volume is 20 million shares and its daily volume is 170 million, says its CEO, Douglas Atkin.

More volume makes it more likely that investors will get a good price when they buy or sell. That could give E-Trade customers, who will pay normal per-trade commissions, a better after-hours deal through the active Instinet than those who trade on other services.

Still, E-Trade CEO Christos Cotsakos says after-hours trading could be volatile. He plans to offer educational materials to his customers.

He says he will recommend that customers use "limit orders," by which investors specify the exact price at which they will buy or sell. That should minimize the chances of an investor getting burned by volatile price