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Thursday, 15 November, 2001, 18:41 GMT
Internet guru quits Wall Street
Henry Blodget
Blodget has taken redundancy from Merrill Lynch
Henry Blodget, the man famed for inflating the internet bubble, is quitting Wall Street.

Mr Blodget became arguably the best-known - and among the best-paid - names in the financial world, as the analyst responsible for internet shares at a string of investment banks.

In the process, he became a blazing symbol for the internet mania of the late 1990s - and a hate-figure for those who lost money in the subsequent collapse of tech stocks.

Mr Blodget will be leaving his present employer, Merrill Lynch, having accepted the redundancy package that the investment bank has made available to almost all its 65,000 staff.

According to a report in the New York Times, he plans to take time off, to finish writing a book on the internet mania.

Ups and downs

Mr Blodget shot to Wall Street fame at the end of 1998, when he predicted that shares in online retailer Amazon.com - then trading at around $240 - would soon hit $400.

His prediction came true, albeit temporarily, and he applied his bullish views to a string of internet shares, including Pets.com and eToys.

His media-friendly manner, and the glamour that his apparently magic touch brought to his employers, helped make him the closest thing that Wall Street had to a household name.

But when the internet dream turned sour, Mr Blodget remained defiantly optimistic, continuing to recommend shares in companies that subsequently dwindled, or even failed.

In the process, he helped spark a fierce debate on the liability that analysts bear for tempting investors into ultimately disastrous decisions.

Aggrieved clients

In July, Merrill Lynch agreed to pay a former client $400,000 to settle allegations that he was misled partly by overly bullish research from Mr Blodget.

The complainant insisted that he had lost about $518,000 on internet firm Infospace, because Mr Blodget's "buy" rating on the shares conflicted with investment banking work that Merrill was providing for the firm.

Mr Blodget's reputation has suffered in the past year, and online investor message boards buzz with criticism of his now-discredited prognoses.

The Infospace case was one of a string of cases brought by aggrieved investors against Wall Street analysts.

In August, a US federal judge threw out a securities fraud case against Morgan Stanley and its internet analyst, Mary Meeker.

Change of heart?

Ironically, Mr Blodget had started to become marginally less bullish in the weeks before his decision to leave banking.

He has downgraded his assessment of likely advertising revenues, become more sharply critical of media giant AOL Time Warner, and even tempered his enthusiasm for Amazon.

In a research note issued shortly after the 11 September attacks - and hence barely remarked on by the press - he slashed his forecasts for Amazon, and said the firm would have trouble meeting its target of breaking even by the fourth quarter.

He will at least have time to find out whether his newly gloomy prediction comes true; he will remain at his desk at Merrill until the end of this year.

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 ON THIS STORY
Michelle Brier, New York investment commentator
"Henry Blodget will be missed by Merrill Lynch...he could make or break a stock"
See also:

23 Oct 01 | Business
Merrill offers redundancy plan
22 Aug 01 | Business
Analyst fraud legal case thrown out
10 May 01 | Business
When not to believe the experts
14 Jun 01 | Business
Wall Street analysts under fire
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