A principle of good journalism is that it is better to be right than first. The recent sad case of Emulex suggests it is a principle practitioners of Internet journalism have yet to embrace.

Emulex, a maker of fiber optic combinations equipment, is a young company that was doing quite well – earnings were strong, prospects were good. Until the morning of Friday, Aug. 25.

That, 9:30 a.m. to be precise, is when a press release from the company’s public-relations firm was issued saying earnings statements for the last two years were being drastically revised downward and that the company president had resigned. Internet Wire, a Web-based news service immediately posted the bad news, numerous other financial Web sites followed (some speculating about a Securities and Exchange Commission investigation) and within an hour Emulex shares had plummeted from $103 to $45. By the time Nasdaq halted trading of the stock at 10:33 a.m., an estimated $2 billion was lost.

This would be a splendid example of the Internet’s power to deliver informatio as it happens were it not for one small detail – it never happened. The press release was a hoax, the information utterly false. Nobody checked.

A few Internet journalists apparently tried to check by calling Emulex but because it was only 6:30 a.m. at the California company’s headquarters, the calls went unanswered. A massive fraud that could have been prevented with one simple phone call succeeded because of a difference in time zones.

Apologists for this debacle say the plummet and the rapid recovery in Emulex stock once the hoax was revealed merely proves that the market continues to operate properly; that it reacts to bad news and good by selling and buying. But it hardly needed proving that investors will bail out on companies going in the tank or that they will want a piece of companies taking off. And the recovery is cold comfort to the thousands of honest investors who got skinned in the process.

Some even cite a recent statement by Federal Reserve Chairman Alan Greenspan that one reason for soaring stock prices is that “the rise in the availability of real-time information has reduced the uncertainties and thereby lowered the variances that we employ to guide portfolio decisions.” Feel free to assume that Mr. Greenspan was referring to real real-time information that somebody bothered to check.