The following was posted to the IAIC thread, but seems relevant here now that the topic of IAIC has been brought up for wider consideration. BTW, Elliot, the SEC's review is pro-forma on a 10-SB request for listing; they can ask questions and require additional information, which they successfully did, but they can not question the validity of those answers, and the 10-SB is automatically approved after 60 days. (But readers of the IAIC thread know all that already.)
What I responded to:
To: Elliot Winter (796 )
From: Matthew F. Kern Sep 5 1997 1:37PM EST
Reply #797 of 801
You can read it here folks:
bloomberg.com
Keep in mind that the author is relatively clueless, and has several obvious facts wrong. Readers here will quickly spot some.
My response:
For reference, the full text of the Bloomberg article is:
BN 9/5 Information Analysis Clients Becoming Rivals: Company Spotlight
Fairfax, Virginia, Sept 4 (Bloomberg) -- Information
Analysis Inc., the U.S. company with the fastest-rising stock
this past year, isn't having the same success selling its
software, thanks to the Doug Toomeys of the world.
Toomey is a computer specialist at the National Finance
Center in New Orleans, which pays bills for 30 government
agencies and salaries for 500,000 workers. NFC's computers, like
many others, risk shutting down because they can't read dates
after Dec. 31, 1999 -- a glitch known as the year 2000 bug.
Information Analysis spent millions of dollars developing a
way to patch up some of NFC's computer problems, only to find
that Toomey and other engineers came up with their own solution.
Such inexpensive, home-grown fixes are an increasing threat to
Information Analysis, which already faces competition from a slew
of rival software publishers.
``It's really not difficult at all to fix the problem,''
Toomey said. ``We're moving along pretty rapidly with less
manpower than we estimated we would need.''
That's not what Information Analysis or its investors want
to hear. The company's shares rocketed 65-fold in the past 12 months, making gains in high-flyers such as Dell Computer Corp. and
Microsoft Corp. look like pocket change. Adjusted for nine
splits, shares of the Fairfax, Virginia-based company climbed
from a low of 44 cents in October to a high of 31 7/8 on July 16.
Shares fell 1 to 28 1/2 today.
IAI's run has swelled its market capitalization to about
$200 million. The company is betting on revenue many times that
from sales of its Unicast products, estimates John Stanley of
Newby & Co. in Rockville, Maryland, which helped arrange a
private sale of stock for Information Analysis in March.
Sales Decline
So far, little has materialized. Sales in the second quarter
fell to $1.79 million, a 41 percent decline from $3.05 million in
the year-earlier period. The weak performance stems from the fact that IAI has unveiled only two contracts for fixing year 2000 bugs, neither of which approach the NFC problem in magnitude. A separate agreement to license versions of Unicast to Computer Associates
International Inc. hasn't yet borne fruit.
Under that agreement, Computer Associates will market a
version of Unicast for systems using newer generations of the
ubiquitous Cobol computer language. IAI's first product, designed for a class of computers used by NFC known as IDMS, goes on sale next month. Computer Associates built its own product, CA-Fix/2000, for the Cobol marketplace, which is at least 10 times as large.
The jockeying comes as clocks tick toward the new century.
Come 2000, many computers will snarl because they can't tell the
difference between Jan. 1, 2000, and Jan. 1, 1900.
That occurs because older computers assume the first two
digits of any year are 19. To fix the mess, programmers must
alter billions of lines of code or trick computers into
understanding the difference in centuries. Cost estimates in the
U.S. start at $100 billion.
That's created a mini boom in stocks of companies that
promise a solution. Of the 29 companies in the Bloomberg Year
2000 index, eight tripled in valued in the past year, among them
Data Dimensions Inc. and Compuware Corp.
Still, some organizations are scaling back their cost
estimates for year 2000 solutions. NFC, for example, will spend
less than $12 million, Toomey said. That comes to less than 10
cents for each line of code, far below the 30-cent-a-line price
of Computer Associates' Cobol fixer. IAI hasn't announced prices.
Self Help
The NFC, part of the U.S. Department of Agriculture, isn't
the only one fixing the problem itself. The Defense Logistics
Agency, responsible for providing food, clothing and spare parts
to the military, chose a tool developed in-house to convert its
40-million-line system.
What makes the defense agency's decision noteworthy is that
IAI tried and failed to win the business earlier this year. After
saying on May 12 it completed a successful ``proof of
concept,'' IAI hasn't told investors that it didn't get a
contract. Rich DeRose, IAI's chief financial officer, had no
comment on DLA.
Some other organizations with computers like NFC's signed
with vendors whose products are for sale now, rather than wait
for Unicast. The U.S. Customs Service is using Platinum
Technology Inc.'s SystemVision 2000.``SystemVision seems
to be OK for what we need,'' said Robert McNamara, who is responsible for assuring Customs's 30-million-line system can
function in the next century. Customs was one of IAI's biggest
clients until a year ago, when a multimillion dollar consulting contract expired.
Brown Brothers Harriman & Co., a New York investment bank,
sent a $3.33 million contract to Forecross Corp., a San Francisco
software engineer, to upgrade its systems, which include IDMS.
Being linked to Computer Associates won't always generate
business for IAI, either. Both Barnes & Noble Inc. and Isuzu
Motors America, two CA customers with IDMS, said they weren't
planning to use Unicast. Richard Kish, Barnes & Noble's chief
information officer, said the bookstore chain's programmers will
rewrite its IDMS software.
To be sure, IAI's products have generated some enthusiasm.
Mike Guido, a senior vice president at CACI International Inc.,
an information services company, said it will use Unicast on two
projects similar in scope to the NFC's. And Information Analysis just yesterday got a vote of approval from the Nasdaq Stock Market, which accepted the company's application to list on its SmallCap Market.
Until Monday, the company's shares will continue to trade on
the OTC Bulletin Board, a quote-posting service with no
regulatory oversight.
--Roger Madoff in the New York newsroom (212) 318-2315/gcr
Matt, for once you're right. Bloomberg did get some "obvious" things wrong.
1. The DLA is using its own tool, true. What he didn't say is that IAIC's tool failed miserably. For instance, it equated every instance of a "$" with a date! DLA was reportedly "up-in-arms" about the false press release and came close to asking for a retraction, but concluded their relationship to Manntech locally was too far along to stir the pot. No wonder Derose wouldn't comment.
2. He missed pointing out that the senior Manntech executive in charge of the relationship is apparently an IAIC stockholder, and not necessarily acting in Manntech's best interest.
3. Similarly, he missed pointing out that Guido at CACI was brought into CACI by Smith, who was responsible for bringing IAIC into CA. Should we guess whether Smith and Guido are IAIC stockholders?
4. He missed that fact that the NASD listing now brings the company under the NASDAQ enforcement staff's scrutiny for the first time, even though he does say that until now, it has traded in an essentially unregulated market.
5. He quotes Barnes and Noble saying they have no need for UNICAST, but forgets to remind us that it was Barnes and Noble who CA quoted in their CA-FIX 2000 press release. Same for Izuzu. In fact he missed the obvious point that CA has almost no yr2k business despite their size and market position.
6. If he had, he might have then pointed out that Brown Brothers thoroughly tested CA's Discovery 2000 tool set and found it woefully wanting. After 4 versions they gave up testing it. Also, while CA touts their relationship with EDS, who worked with BB&H, EDS says they haven't even seen CA's products. He could also have pointed out that after EDS's impact analysis of BB&H's 20million lines of code, they decided only 2 million were worth the expense of remediating.
7. Completely unmentioned is the fact that according to Computer Intelligence, the number of IDMS sites has dropped in half in the last few years, and is now just a few hundred; that it is almost gone from the commercial scene and primarily still exists in the Federal government agencies that that he interviewed. Therefore if they are using Platinum, or in house tools, or other vendors, they don't need and won't use UNICAST, if its ever successfully launched at all.
In summary:
a. the market for UNICAST ADS/O, Ideal, and Easytrieve remediation is very small because:
i. there is relatively little of it to begin with.
ii. what is there, is being replaced with newer better software.
iii. assessment narrows the code that needs remediation by 70
to 90%
iv. what will be remediated will largely be done in house; the first
two are 4GL's afterall, and include their own remediation tools.
v. what isn't done in house, will mostly already be contracted for
by large existing well-thought-of providers like Platinum.
vi. what isn't gotten by them will mostly go to new specialists like
Piercom, John Cullinane's new company, who was the creator
of IDMS-ADS/O and founder of Cullinet which CA bought.
vii. and all of it will be done at prices per line well below CA's
current list price of $0.30/line.
b. The evidence, based on Ken Parson's previous lack of success selling CAST, is that UNICAST will be an unsuccessful entry, even if none of the above was true. The company has yet to announce a single legitimate Yr2K deal; only conversions that include yr2k because they were already in the account.
c. Because of IAIC's promotional and misleading press releases, as well as the obvious stock market manipulation issues that can also be raised, there is a real question as to whether the stock will be allowed to continue trading as these facts are brought to the NASD and SEC staff's attention.
But, Matt, I have to say that Bloomberg, leaving aside the above "obvious" errors, did a hell of a job. It's not really that surprising since the author covers the whole yr2k story for Bloomberg, and comes from a famously well regarded Wall Street family.
Is it you who are "clueless" or is something else going on here? After all it's hard to believe that after a 65 fold run-up, you guys who have been long since last Fall are so greedy. It's much easier to believe that you are simply trying to sucker the un-witting into buying the stock you want to unload. |
