Merrill Lynch Issues 'Y2K: Implications for Investors' Global Survey
Assesses Corporate Readiness for the Year 2000
NEW YORK, July 9 /PRNewswire/ -- Corporations across the globe are
making aggressive efforts to tackle the Year 2000 problem, and most
should be able to do so in time for the millennium, according to a major
report, "Y2K: Implications for Investors," released today by Merrill
Lynch.
"Most companies have been working on their Y2K projects for two years
and there are one and a half years left," said the 450-page report
produced by Merrill Lynch Global Securities Research & Economics.
"Microsoft, Latin America and Communism all changed radically in a lot
less time."
"Merrill Lynch conducted a detailed worldwide survey of thousands of
corporations to gauge how prepared they are for the year 2000, and to
assess the impact of these efforts for investors," said Rosemary T.
Berkery and Andrew J. Melnick, directors of Global Securities Research &
Economics.
This is the third in a series of reports utilizing the depth and breadth
of Merrill Lynch's global research team to address issues of concern to
investors.
"In general, companies are reasonably confident of their own Y2K
preparations, but uncertain about those same efforts by their suppliers
and customers," they said. "Few companies expect earnings to be
noticeably affected by Y2K expenses, although the cost of compliance is
reported to be higher in the U.S. than elsewhere."
The real earnings impact, if there is one in 2000, is likely to be the
result of some revenue shortfall in the short term if systems problems
impact operations and companies are unable to ratchet down costs
quickly.
Likening the Y2K to a space shuttle flight, the report said, "We do not
see Armageddon, but like every space flight so far, there is an element
of the unforeseen. If there are glitches, and there always are,
companies expect to manage their way through them as they do in power
blackouts, and as they did when the AT&T and AOL networks have
occasionally shut down."
Many observers have seen the complexity of networking and interfacing
systems as increasing the potential for a year 2000 meltdown. "Our own
view is that the very complexity and dispersion of these systems is, in
fact, insurance against a complete shutdown of commerce when the
millennium starts," the report says.
"There won't be a domino effect, because there are lots of switches
throughout the system that will put on brakes," said top-ranked analyst
Jeanne G. Terrile, who authored the overview of the report.
"One of the great ironies of the Y2K issue, which is about the simplest
of things -- the ability to write the correct date -- is that it is
exacerbated by virtually every modern management practice," she said.
Among these, she points to just-in-time inventory practices and
outsourcing as having left companies more vulnerable to a crisis beyond
their own walls. Globalization and decentralization mean that many
companies are working at very different levels of sophistication in
different markets, further increasing points of vulnerability. And with
the recent wave of mega mergers and alliances companies may have to both
upgrade and integrate systems at the same time.
In the US, most corporations surveyed expect to be fully compliant by
year-end 1998. In Europe, many firms are using the Y2K, combined with
the introduction of the Euro, as an opportunity to upgrade their
systems.
Merrill's team in Japan sees a real silver lining in the Y2K.
Historically, many Japanese companies relied on customized software to
run their businesses and this often resulted in inefficiencies. The
report says that a focus on Y2K compliance should result in the
implementation of more standardized software and open systems, enhancing
efficiencies.
The report also found that although most Asian companies are in the
early stages of addressing the Y2K issue, many major Asian banking
systems are newly automated, and therefore, they are Y2K compliant.
In China, most big industries are looking to central agencies of the
government for direction. Because Y2K compliance does not seem to be a
priority there, Chinese industries, such as airlines, could be left
vulnerable.
Of the 460 Asian companies surveyed, 72% expect to be Y2K compliant.
India and the Philippines top the list, with expectations, respectively,
of 97% and 86% compliance. In Indonesia and China, fewer than half of
the companies surveyed expect to be Y2K compliant.
In Australia/New Zealand, and South Africa, almost all leading companies
surveyed said they believe they have the Y2K issue under control, and
have procedures in place to control the millennium bug. In Latin
America, most companies expect to be Y2K compliant, although the
Brazilian telecommunications industry, where Y2K compliance is competing
with the demands of privatization, is a concern.
Copies of "Y2K: Implications for Investors," are available upon request.
SOURCE Merrill Lynch & Co., Inc.
CO: Merrill Lynch & Co., Inc. |
