Numerical investigations of a warm‐fluid model with an isothermal equation of state for the perpendicular dynamics of an axisymmetric, magnetically confined pure electron plasma predict an exponentially unstable,l=1, diocotron mode for hollow density profiles. The unstable mode can be identified with a stable, nonsmooth mode that exists in cold drift models but which is destabilized by finite temperature effects. The unstable mode has many properties similar to the experimental results reported by Driscoll [Phys. Rev. Lett.64, 645 (1990)].