USA Today - Y2K fears start to surface
Pretty good article for USA Today. Bold stuff is emphasized by me.
usatoday.com
Y2K fears start to surface
By M. J. Zuckerman, USA TODAY
Corporate America is exhibiting nervous ticks and twitches as the Year
2000 nears.
For almost two years, companies made mostly rosy predictions about
their ability to handle the Y2K computer glitch. But now, some of the
nation's largest corporations are expressing reservations in quarterly Y2K
status reports filed with the Securities and Exchange Commission.
[...]
While no one predicts devastating system failures, several companies
draw apocalyptic pictures. The SEC requires firms to provide worst-case
scenarios. Such disclosures are meant to warn investors and provide
some defense against liability lawsuits if the worst comes to pass.
"These filings are neither basis for panic nor reason to be reassured,"
says Steve Hock, of Triaxsys Research, a consulting firm that analyzed
SEC filings.
Common themes
Hock identifies five trends in the latest SEC disclosures, which reflect
work completed through June 30:
Domino effect. Companies are recognizing that there are likely to be
failures resulting from the complex relationships of systems. Mobil Oil,
for instance, says the failure of one or more systems that individually are
minor could "trigger a cascade of other failures for Year 2000 reasons,
the combination of which could have a material adverse effect on
Mobil's operations, liquidity and/or financial condition."
Embedded systems. These are microchips contained in millions,
perhaps billions, of products that may have some time-sensitive
qualities. If they fail, they could trigger the domino effect.
Enron, one of the world's largest suppliers of energy, admits that it, its
suppliers and other firms on which it depends won't be able to find and
fix all its embedded chips.
The company warns: "Some of the embedded chips that fail to operate or
that produce anomalous results may create system disruptions or
failures. Some of these disruptions or failures may spread from the
systems in which they are located to other systems in a cascade. These
cascading failures may have adverse effects upon Enron's ability to
maintain safe operations and may also have adverse effects upon
Enron's ability to serve its customers."
Supply chain problems. The failure of a smaller provider to fix its
Y2K problems could cripple a larger company. Philip Morris reports that
it considers 700 of its 6,000 "key business partners" likely to suffer some
Y2K failures.
Upshot: "The possible consequences of these disruptions include
temporary plant closings, delays in the delivery of products, delays in
the receipt of supplies, invoice and collection errors, and inventory and
supply obsolescence. Depending on the number and severity of
disruptions, it is possible that the business and its operating subsidiaries
could be materially adversely affected."
Stockpiling. Pharmaceutical giant Eli Lilly, for example, "has made the
decision to increase inventories of certain key products in order to have
additional finished stock in the event excessive consumer purchasing
occurs in late 1999." Such stockpiling by companies could skew
economic statistics and create the illusion of rapid economic growth.
Replacing old systems. Hock says about 25% of companies are
installing new systems rather than upgrading old ones. Those firms are
"at terrible risk," he says. "Historically, 80% of technology projects that
ultimately fail to make deadline are reported to be on time and trouble
free just three months prior to" deadline.
[...] |
