This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Southwest Triumphs, Knight Doesn't, as Computers Go Wild

DALLAS ( TheStreet) -- Uncontrolled sprees by malfunctioning computers, one at a brokerage firm and one at an airline, made news this week. But the airline's problem was small enough to fix.

In fact, Southwest > (LCC) , provided a positive outcome for its customers, making them whole and also issuing $150 vouchers to each of them in what S&P Capital IQ analyst Jim Corridore said was likely a "very minor" financial event.

By contrast, Knight Capital Group (KCG - Get Report) lost $270 million after taxes, its shares have fallen 69% this month, and its CEO, fighting to save the company, had to sell 73% of it at a cut-rate price

"Our problem was much more contained," said Southwest spokesman Brad Hawkins.

Knight Capital's problem occurred on Wednesday, Aug. 1, when a software glitch led to a series of unintended trades that left the company holding $4.5 billion of unwanted securities. Two days later, a computer glitch that followed a discounted ticket promotion by Southwest meant that customers who tried to book single tickets somehow found themselves buying multiple tickets -- at times, as many as 20 -- and paying for each of them.

"The problem with computer software is that as it gets better and better, the bugs become more difficult," said Eric Scott Hunsader, founder and CEO of trading software and technology firm Nanex. "With well-developed software, the only bugs left are the impossible ones."

Imperial Capital airline analyst Bob McAdoo said both glitches led to unrestrained computer behavior. In the case of Southwest, "money was sucked out of some people's bank accounts," McAdoo said. "I have never seen anything like that before. If you bought a ticket with a credit card, it would buy more and more tickets automatically until the credit card maxed out."

Southwest's problem occurred between 4 p.m. and 5 p.m. Friday, Aug. 3, shortly after the carrier decided to thank all of its 3 million Facebook friends by offering half-price tickets on select fares. Many of those friends -- Hawkins would not say how many -- responded to the promotion, leading to a technical glitch that was apparently related to the overwhelming response.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
LUV $43.45 -1.92%
KCG $12.44 1.47%
YHOO $44.13 -0.69%
AAPL $124.25 -0.14%
FB $81.66 -0.67%

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs