IF YOU THINK about it, this whole Y2K thing has been pretty predictable. from SmartMoney
Six months ago -- heck, two months ago -- whispering that a stock had a "Y2K problem" was tantamount to saying it carried the ebola virus. Investors would run for the hills and the company would be locked in quarantine.
And we're not just talking about the usual end-of-the-world stories (you know, the ones involving air traffic controllers, ATMs or elevators). Companies by the hundreds were expected to curtail spending on everything from the most exotic "enterprise software" to the most mundane personal computer. Example: Not long after a glowing cover story in BusinessWeek celebrated the stock's extraordinary run during 1998, highflying data-storage company EMC (EMC) became tainted with the Y2K virus and its shares plunged 30%. Seems the analysts got wind that EMC customers were getting set to "lockdown" purchases of new peripherals until the millennium storm blew past.
Well, a funny thing happened on the way to the meltdown. The doom and gloom theory just didn't pan out. Sure, some technology spending was curtailed because of Y2K fears. But what the market is saying now is that it wasn't so bad after all. And as a sigh of relief washes across the markets, the formerly Y2K afflicted are showing up as rare winners in a sea of stocks muddling to find direction.
On Monday it was none other than EMC (see story) that lit up our Map of the Market. Once again a highflier, it hit a new 52-week high and has now regained every dollar it lost in the spring. Then there's Oracle (ORCL). The huge database software maker reports earnings after the close on Tuesday, and analysts are expecting a healthy surprise. Why? "Almost universally," says Salomon Smith Barney analyst Neil Herman, "the feedback received from software companies is that Y2K is fading." (See story.)
It's true that part of the confusion stemmed from the fact that no one has had to forecast this sort of thing before. Who knew what to expect? Still, it's worth noting that some were skeptical before others. Credit Suisse First Boston's PC analyst Michael Kwatinetz said back in June that the Y2K "alarmists" were overplaying their fears. More common were analysts like Banc of America Securities' Paul Fox, who covers EMC. When he finally pushed the Buy button on Monday, he and his unlucky clients had already missed a 43% upside move in EMC stock.
"EMC management continues to express confidence that it will not be negatively affected by lockdowns and its confidence so close to the fourth quarter is and will be increasingly credible," Fox said in a report. Thanks Paul. |
