Things Bill ignored from EDS News release.
The central point of EDS news release is that EDS has maintenance contracts with lots of big clients. EDS will not get any extra money due to the structure of existing contracts. So making their clients is
a liability for EDS. They are down playing the whole thing. They released these numbers after pressure from investors and analysts.
This may be a bad news for EDS but it is great for MD. EDS will be the first one to sign with some body who can save them time and money and MD claiming to have the capability to do that. They are not going after finding new clients, instead it is their liability and they will be forced to fix it without any extra money. They are claiming that they are hiring 100s programmers and even calling some of them out retirement. This very well proves that problem exists and companies are running out of resources. They also believe that their the cost of fixing the y2k problem will grow since the cost will go up when less time will be left. I think Mad Monk's predictions were right about EDS.
Let's reread that press release in the light of above argument.
May 28, 1997
EDS Will Spend $144 Million
To Adjust Computers for 2000
By EVAN RAMSTAD
Staff Reporter of THE WALL STREET JOURNAL
PLANO, Texas -- Electronic Data Systems Corp., one of the
nation's biggest computer users, says it believes it will spend
about $144 million over the next three years to update its
computer systems to work properly in the year 2000.
The computer-services firm said it aims to cover that cost by
generating $1.3 billion in new business providing so-called
"Year 2000 conversions" to other companies.
EDS disclosed the estimate after months of pressure from
analysts, who believed complications caused by the way
computers read the 2000 number would loom particularly
large for EDS, which has a large customer base and operates a
variety of systems.
Many companies and institutions are scrambling to update
computer programs that were written with the year
expressed in two digits, such as using 97 for 1997. Such
programs won't operate correctly in 2000, when the year
would be represented as 00.
EDS arrived at its liability figure after a year studying
contracts and surveying its 9,000 customers, including its
largest, General Motors Corp. In addition to its own systems,
the figure covers costs for updating computers and software
of customers that, because of their contract structure, won't
pay extra for the service.
EDS hopes the new year-2000-related business it signs will
yield about $200 million to $250 million in profit over the
three years -- roughly what EDS makes in a typical quarter,
said Stuart Reeves, an EDS executive vice president. "I don't
want to paint this as a big problem or a fabulous
opportunity," Mr. Reeves said.
He noted, however, EDS's Year 2000 liability and new
business potential may grow, since the cost of coping with
the problem will rise when there is less time to work on it.
The company is currently negotiating Year 2000 conversion
contracts worth about $350 million, Mr. Reeves said. Many of
the conversion services it is now marketing grew from work
EDS performed for other customers under broader contracts.
To help with the new business, EDS is hiring several
hundred programmers and calling some out of retirement
this year.
EDS stock fell in recent weeks after the company's
first-quarter profit declined. The company last week said it
expects another profit drop for the second quarter, owing to
continued pressure after a slowdown in new business
signings last year. EDS will eliminate as many as 9,000 of its
98,000 positions to lower costs.
In composite trading Tuesday on the New York Stock
Exchange, EDS shares closed at $38.25, up 50 cents.
The disclosure of Year 2000-related costs removes the
uncertainty from another part of EDS's finances. "It was
clearly a point of concern for investors," said Brian
Maimone, an analyst at Furman Selz Inc. in New York.
Copyright c 1997 Dow Jones & Company, Inc. All Rights Reserved. |
