[To ALL]
As promised, here is a synopsis of responses to my previous post #1205.
President Clinton's strategy in dealing with the Y2K issue seems to be more concerned with not rocking the boat for the sake of Democratic Party re-elections than in minimizing impending economic turmoil.
Public disinterest is causing the market to be very selective right now. MAST, IMRS, CBSL and SYNT rose significantly in a short span recently, soon followed by CHRZ. Looking at those firms whose price has rebounded from the Y2K sell-off 2 months ago, the market seems to be selecting firms with large capitalization, revenue growth, positive EPS, and a clear, non Y2K future beyond year 2000. For some reason, maybe just to be safe, it appears that investors are not yet buying into the notion that, after 1999, Y2K work will continue for another 2 years or so. Investors seem to be focused on the bottom line, quietly chanting the mantra "Show me the money".
As less time will be available to learn new software, odds are desperate firms will want to leave the fixing up to the "experts" for rapid correction, regardless of cost. Consequently, investors prefer Y2K service providers and factories, rather than software vendors, unless the software product is outstanding. Rumor has it that CA was dissatisfied with software from both PTUS and VIAS and their stock reflects that.
Teaming agreements seem to have almost no impact on share price. Such agreements can be a double edged sword when the market asks the inevitable question: "Since X has so many agreements, how come X is not flush with contracts? Is there something wrong with X?"
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Here are my thoughts on Forecross ...
Early last year, anticipation of getting on the AMEX combined with shorts covering their positions pushed share price to around $24. Now it seems FRX will move to NASDAQ, and even though a new contract was recently announced, price remains unaffected. Why?
First, I think investors want to see evidence of an afterlife after year 2000. What is Forecross' official plan that is *NOT* Y2K related? Software migration was their original service and before Y2K became an issue, V.FRX share price was around $1. So I don't think it alone will be enough to sustain a high share price.
Second, I was informed by the IR department a few months ago that some, if not most, of the "service provider" teaming partners will be doing most Y2K work at their own facility. The estimate I received was that only about 10% of the work the partners get will be of the type that must be passed on to Forecross. This should be counter-balanced with the large number of teaming agreements Forecross has, and re-balanced once more because these service providers, such as EDS, have teaming agreements with numerous other Y2K firms. I think the market does not know how all this will wash out, and so once again, investors want to see the bottom line (earnings).
Although many firms don't even announce contracts, wouldn't additional announcements from Forecross help shareholders better appraise the value of all their teaming agreements? If so, why the dearth?
Third, When I read announcements of contracts by other Y2K firms, they typically have a statement by the customer that says something like, "After having completed an exhausting search, we're satisfied that YYY's offering is the best out there." You would expect to see that, of course. But as more of these announcements pile up on my desk, I wonder, what exactly does Forecross do best? What capability is unique? How big is the market for those specific services?
So, here are the following questions I still have:
1. What is Forecross' official business plan beyond year 2000 that is not Y2K related?
2. What is Forecross' unique edge? Will it last?
3. What is the release date for the next quarterly report?
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PS: A sad development ...
Although my previous post #1205 mentioned no names, no firms and discussed fairly generic issues, something inside it hit too close to home. Ever since it was posted, the IR personnel at Forecross has not been taking my calls. Someone *outside* the firm calls me back, but the responses I get amount to "I don't know", "stocks go up and stocks go down", and other content free platitudes. However, one response was revealing:
Me: "Why isn't Pat Jones (the IR person at Forecross) taking my calls?"
Him: "It was an executive decision. Besides, you were never a large shareholder anyway."
Both this development and the implication that large shareholders (50,000+) are given different quality information is disturbing. Is this common practice at other firms?
Mark Jurik
Y2K@jurikres.com
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