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Many y2k companies have shown real earnings so far. Their earnings will grow in the next 4 quarters (assuming the y2k companies will not accept y2k work after June 1999). Since they have already spent on new facilities, new sales offices here and abroad, alliances, etc. they will retain most of the earnings. As more and more companies finally come out of their "denial" or in-house assessment stage, they will compete for y2k programmers, y2k conversion factories, y2k testing facilities and tools, etc. As usual the Information Technology projects (started earlier this year) will fall behind schedule and overrun their budget. Since the deadline can not be postponed, the budget will become meaningless and money will spent to meet the deadline. The problem is there are so many people and so many hours in a day. Programming jobs are time-consuming. y2k companies will be fully booked and will enjoy the y2k windfall i profits. There are doom-sayers (may be "shorts") that think these y2k companies will disappear after 1/1/2000. Unless they are scams, as the deadline approaches, these companies will have earned a lot of cash (at a time when the tech sector are beaten down due to problems in Asia, recession in Japan, uncertain devaluation problem in China, Intel's postponement of Merced chip, etc.), proven track record of their service quality, and industry contacts. Many multinationals are facing problems. Perhaps y2k companies may be one of the few sectors where earnings are to explode. What comes after 1/1/2000? Simple. y2k companies get their contracts renewed for a few more years - for migrating from main frame to servers, web-enabled systems, data mining, maintenance of their servers, linking databases to mainframe systems for those that want to keep their mainframes, etc. More lay off of IT departments from companies. Companies like Du Pont are getting rid of their Information Technology department. Accounting and consulting companies like Anderson Consulting are hiring the people from Du Pont and returning them back to Du Pont as contract programmers. MSFT NT servers, Compaq's acquisition of DEC, etc. are some early indicators of this trend. IBM and other computer companies that have been traditionally working with financial sector are now entering the oil and chemical sectors. Companies are now re-engineering their businesses using ERP (SAP, BAAN, PSFT, etc.) and SCM (supply side chain). This area needs a lot of people and the projects take 3 or more years to complete. In one or many of the above, outsourcing for IT services will grow beyond year 2000. With the shortage of people with technology skills, who has people with the required skills and track record of service. None other than the y2k companies! Two possibilities: (1) these y2k companies transform into IT outsourcing service businesses and continue growing their cash reserves (some are already in transition) or (2) Accounting companies that are short of people with skills, may buy out these y2k companies for their people and their cash holdings. These y2k companies may buy back their own stock too. Either way, it will be a long term capital gain. Ram |
