Briefing.com strikes again
Updated: 30-Oct-98
10:50 ET ******
ALYDAAR SOFTWARE (ALYD) 6 7/16 -7/16 It's time to face the music. The expected Y2K boom never happened! At least, not in the scale expected by investors. The country was supposed to have spent $600 Billion on fixing the Y2K problem. That's roughly equivalent to the simultaneous appearance of companies the size of General Motors, Exxon, Wal-Mart, IBM, ATT, and Boeing, practically overnight! Yes, there was, and is, a Y2K problem. Yes, a great deal of money has been spent on the problem. It was just a complete misjudgement on the scale of what would happen. The consulting firm Gartner Group deserves a lot of the blame for the fear mongering, as they promoted the problem at this scale.They had a hand in it of course, as they were even trying to get Congress at one point to force every public company to undergo a Y2K assessement, for which Gartner Group had a ready made product. But why is Alydaar the whipping boy for this message today? Alydaar is the last of the "pure" Y2K stocks still standing, at least for now, and today's earnings release illustrates the above point, which was already been shown by Viasoft (VIAS), Peritus (PTUS), and SEEC (SEEC). Today, ALYD reported third quarter revenues of $8.7 million, down from last quarter's $9.6 million. Earnings were okay, at $1.7 million (20% net is very healthy), but it is only $0.10 per share, down from last quarter's $0.16 per share. This isn't evidence of boom-time. Certainly all past company projections of Alydaar reaching $100 million in revenue in 1999 ought to be completely dismissed. There is a business here, but, face it, it isn't worth a market capitalization of $110 million, (and it certainly wasn't worth $400 million when Briefing first covered Alydaar in September 1997.) To complicate things, ALYD has to make a transition to another line of work, immediately. Although they licensed rights to some kind of ERP (Enterprise Resource Planning) technology from SenseNet, they did not buy an existing business, and they should be viewed as starting from scratch in ERP. What's the real lesson here, for investors who never even heard of Y2K? Simply put: Stories are great, but stocks are companies. As such, they must be judged by results, and by things you can actually measure, not stories. Once we rather curtly compared investors in this Y2K company to Linus from the Peanuts cartoon strip, who endlessly, and with undying faith, sits waiting for the Great Pumpkin, who never shows. Is this the Halloween when Linus finally comes to grips with reality?
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