Mark, well thought out post. I look forward to your post where you summarize your conclusions.
Here is my two cents (note: these comments correspond to your main text, not the summary questions)
1. Yes, I agree that the reason Y2K vendors are not doing as well as expected is because either companies are first trying to do Y2K work in-house or they are (willingly or unwillingly) procrastinating. Those that are doing it in-house bought tools long ago. Those that are procrastinating will largely go with one of the dozens of Y2K vendors/consultants who call them every week who have already bought their tools. So, yes, I'm not optimistic about the fortunes of vendors that sell tools.
2. Somehow I think there won't be a shortage of consulting firms to do Y2K work as just about anyone who can program will instantly become a Y2K consultant and greed and ignorance will prevent many from saying "no". However, I do think the "major" firms like ALYD will definitely raise their rates and/or pass along cost increases necessary for hiring quality talent to their customers.
3. I'm not sure who you are classifying as "factories". ALYD is definitely a Y2K factory. As AYLD just announced contracts with AMD and Aerospace, obviously you must be excluding ALYD from the "few, if any" comment about contracts announced this quarter. As ALYD has shown a profit the past two quarters and has grown eps from .01 to .10 with some forecasting .15 for the one just past, I assume you are excluding them from the firms you indicate have had "one or more losing quarters."
4. The only money that is flowing into Y2K companies is going to the body shops. Vendors that sell tools have almost all been cut in half and I see no indications things will improve as sequential revenue is not going up. As for factories, again, I wish I knew who you are including in this group. In ALYD's case, I think institutions like the numbers they are putting up (assuming you compare them to reality and not Y2K hype), but are looking for a solid post Y2K strategy before investing in a major way. BTW, I expect that to change before the end of the summer.
5. The vast majority of investors don't have a clue what differentiates one Y2K firm from another. The most popular Y2K stock is ZITL and they haven't booked a single Y2K dollar.
6. Joint ventures and teaming agreements between "major" Y2K vendors and small consulting firms are relatively meaningless. Fortune 500 companies, where the money is, have a hard enough time getting approval to send mission critical code to the majors let alone to some mom and pop consulting firm. Obviously I see the ALYD-CPWR relationship as a partnership between majors-- one where both companies get their regular fees.
- Jeff
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