E*Trade Outage Adds to Recent E-Commerce Woes

E-commerce suffered another public relations blow Friday.

E*Trade (EGRP) customers trying to buy and sell shares were locked out of trading for most of Friday due to technical problems -- the second major service problem for E*Trade this year.

The outage follows a 22-hour outage on June 10 and 11 at online auction house eBay (EBAY). That prompted calls for eBay and other online companies to beef up technology spending. Schwab (SCH), for example, announced last month a deal with IBM (IBM) that will boost its capacity. And E*Trade spent $15 million on technology during the second quarter, double the year-earlier quarter's total and up from $14 million in the previous quarter. It's scheduled to report third-quarter earnings on July 19.

An E*Trade spokesman says it "appears" a "communications interruption" brought down trading after the market opened and kept it down until around 3 p.m. EDT. He also notes that trading was available at the open and that E*Trade was able to execute the majority of its early trades.

But he wasn't able to say what time exactly the outage began and what time it ended. Customers were able to access the site and see quotes, portfolio and other financial news, he says. Friday afternoon the company was still analyzing the exact cause of the problem.

E*Trade's last major outage occurred in early February during a three-day period when the site experienced intermittent problems after a change in software.

Friday the chat boards were rife with speculation about E*Trade's outage, with some investors insisting that the site was down and others screaming that it was actually up and running. There were also some calls to write the New York state attorney general.

The New York attorney general's office launched an inquiry into online trading in February after the E*Trade outage and others at such other major brokerages as Schwab created a flood of customer complaints to his office. In early June, Attorney General Eliot Spitzer said he expected to be able to talk about those results in midsummer.

E*Trade shares fell slightly Friday, giving up 3.5% to close at 39 3/4.

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