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Online Brokerage ETrade Goes Offline
For Second Straight Day

By Eileen Glanton  Associated Press
NEW YORK — Online investors were unable to buy or sell stocks through ETrade for a second straight session today, as a software problem continued to plague the Internet brokerage.

Members who signed on hoping to place trades were met with a message that read, "Access to some areas of your account may be temporarily unavailable."

The trading function was unavailable for 75 minutes Wednesday morning, and about 5 percent of ETrade's customers were unable to trade electronically throughout the afternoon.

Today, the problem again affected the entire trading function for about an hour, beginning at around 10 a.m. EST. By 11 a.m., service was restored to about 75 percent of customers, the company said.

Brokers at the Palo Alto, Calif.-based firm took telephone orders, but a swarm of jilted online traders jammed the lines, traders and analysts said.

The problem resulted from a change in the software used to process trades. The company has refused to specify the problem, but a spokeswomen late Wednesday said it had been identifed and fixed.

When the system was still down Thursday morning, enraged investors immediately turned to Internet chat rooms to disparage ETrade. Dubbing the brokerage EtrytoTrade or ETrash, many threatened to move their accounts.

"The question is: Is it possible to actually ever access anything long enough to close an account?" wrote one trader.

Vincent Crisci, an ETrade customer who trades over the Internet several times a week, said he is frustrated enough to look into other services.

"It's a huge violation of a trust," he said. Crisci said Wednesday's outage prevented him from canceling an order to buy stock, resulting in an unspecified loss.

It's not clear how many people have been affected by the outage. ETrade is one of the largest of the increasingly popular online brokerages, processing an average of 40,000 trades per day in the final three months of 1998.

It's not the first online brokerage to falter.

"There are growing pains throughout the entire industry," said Julio Gomez, founder of Gomez Advisors, a Cambridge, Mass., research firm that focuses on electronic commerce. "Since Thanksgiving, all the big firms have been pushing the outer limits of their capacity."

The increased volume has been fueled in part by the rise of Internet stocks, which have soared in recent months. Day traders, who try to reap profits from short-term swings in stock prices, have also embraced the online brokerages.

Online investors often complain about sluggish connections or delayed trades during busy sessions.

Analysts said ETrade's troubles mirrored the old woes of America Online, which experienced persistent delays and outages in 1997 as millions of new Internet users signed onto its service.

After spending heavily to upgrade its systems, AOL continued to thrive. It currently has 15 million customers, plus 2 million through its subsidiary CompuServe.

"AOL was unmercifully castigated for its problems," said Phil Leigh, an Internet analyst with Raymond James & Associates in St. Petersburg, Fla. "But it came out much stronger. So will the Internet brokerages."

Within the burgeoning industry, ETrade currently ranks third in volume behind Charles Schwab & Co. and Waterhouse Securities, and third in accounts behind Schwab and Fidelity Investments, Gomez said.

ETrade handled 2.8 million total transactions in its most recent fiscal quarter, up from 1.6 million in the same period of 1997. The company has wooed investors by offering a wide range of financial information on its site, including free real-time stock quotes for members.

Analysts said that while regular upgrades are necessary in the highly competitive market, the Internet brokerages must be careful to ensure good service.

"As time goes by, customers will grow fed up with delays," Leigh said.

Wednesday, shares of ETrade fell $3, or about 5 percent. This morning, however, the shares recovered a bit, rising 37 1/2 cents to $55.62 1/2 on the NASDAQ.

ETrade has set up a special e-mail address for investors who want to ask questions or lodge complaints: service2(at)etrade.com.

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