Dodger & Sid
If Y2K earnings, lasting two years from this date are viewed as extraordinary items for accounting purposes, this would be unusual because the earnings last over a single year. Any discussion of flat end to Y2K work in January 2000 is not supported by industry analysis. Such work is expected to trail off over several months to years, and margins would only sink in line with the drop.
However I agree most strongly that IAI needs to show a future path that takes them beyond 2000. Otherwise they could drop earnings precipitously in 2000.
As I posted earlier, the future of IAI is contingent on two (2) items from here on out. The first is solid publicity to make IAI's name known to the business and investment community as a company worth taking notice of. The second is identification of ANY OTHER PRODUCT AREA...... My best guess remains using the migration tool against JAVA, CORBA, and the wave of migration to the 'World Wide Web.' This is in line with their capabilities and takes them away from the low margin migration work between mainframe languages of which you have spoken.
Please note that SOFTWARE ENGINEERS have much to do and a bottomless floor on migration services after 2000 is not realistic. There are other problems that staff can perform. However we can see how profitable that business as usual migration was from pre Y2K earnings of various companies... i.e. 15% and minimal growth. The WWW answer has higher margins and steep growth.
Keep in mind the size of Y2K earnings will be huge, and quantity may make a qualitative difference. Also PROFESSIONAL SERVICES companies never do the same thing again, when Y2K ends the services portion of IAI will see that as business as usual. Contracts end and technology changes monthly.
If you are short, watch for announcement of any plan beyond 2000, one small plan could ruin your day. If you are long, beware any mental inertia at IAI that lets them believe they can avoid moving away from the same old migration business as a post 2000 revenue base. Look for shrink-wrap to support CA JASMINE or other new products, JAVA as a target language and CORBA wrappers for old mainframe COBOL to move to the web and the new round of web based MIS that is coming.
As for a PE of 1, bah, a check of 40,000 stocks in the Wall Street City database shows only a few at a PE of one, those mostly going out of business or bankrupt. IAI may not be your favorite stock, but it is neither bankrupt nor going out of business. IAI never traded at a PE of 1 before. I don't know if any of it's competitors trade at a PE of 1, if so let me know. This sounds like deliberate misinformation Sid. SHOW ME AN EXAMPLE OF A SIMILAR SITUATION!
..................Matt
PS All is well here, and although I am busy as heck I'm still alive and kicking! TOCK |
