Stock sell-off brings Spectrum back to earth


NEW YORK -- Motivated by the skeptical commentary of a popular stock market reporter, investors in Spectrum Information Technologies Inc. have finally begun to do what insiders have done for weeks: sell.

Dan Dorfman of cable channel CNBC helped touch off a huge selling spree in Spectrum, which has been the most actively traded over-the-counter stock for the past three days. Shares of the company plunged $5.75 yesterday, to $6, in Nasdaq trading.

Spectrum, a high-flier that gained $7, to $11.75, in the previous seven trading days, had been a stock market winner on news that American Telephone & Telegraph Co. had agreed to license Spectrum's patents for sending computer data over cellular telephones.

Even as investors clamored to buy shares after the announcement on May 11, though, private investors who owned restricted insider shares were filing forms with the Securities and Exchange Commission to sell more than a million shares. Yesterday 35 million shares changed hands -- the highest trading volume for a single company in Nasdaq history.

Monday, the New York Times reported that Don L. Padilla, a lawyer for AT&T; who was a negotiator in the Spectrum deal, had called Spectrum's estimates of hundreds of millions of dollars in royalties from the deal "a gross exaggeration." By yesterday afternoon, a report by Mr. Dorfman led investors to act.

Peter Caserta, the chief executive of Spectrum, said yesterday that his use of the term "hundreds of millions" was an estimate of royalties over the next seven years, and the estimate was based entirely upon AT&T; projections. "We didn't come up with the numbers," he said.

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