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To: Karl Drobnic who wrote (6656)	11/29/1997 3:31:00 PM
From: Tim J. Flick	Respond to of 31646

Of Possible Interest: Top Stories: Networkers Face a New Competitive Issue: Y2K Compliance By Kevin Petrie Staff Reporter 11/28/97 12:49 PM ET Technology's dirty little problem -- the Year 2000 bug -- ought to give Cisco (CSCO:Nasdaq) and other networkers a bite on the you-know-what. But the question is: How big will that bite be? While corporations are paying network suppliers big bucks to increase their network bandwidth, the expense of the next millennium is clouding 1998 budget forms. "I think about it on every company we own," says Marc Klee, co-manager of the John Hancock Global Technology fund. "There are going to be some expenditures deferred" from network hardware and especially client-server software, he says. Klee remains a devout bull on Cisco stock, but acknowledges that Y2K represents an unknown threat to its business. The heart of the Y2K problem is that many old computer systems could read the date "2000" as "1900," which means that a blizzard of snafus is almost certainly waiting out there with father time to usher in the year 2000. As TheStreet.com's Cory Johnson has reported in several stories, many corporations still have a long way to go in preparing their systems for Y2K. Y2K and networkers? Cisco and the gang are expected to have little trouble repairing the internal clocks on their computerized products, but that's not the Y2K problem faced by the networkers. Here's the rub: Corporations can't afford it all. They must purchase switches and hubs to boost bandwidth -- but they must also pay computer experts to repair the Y2K bug. A purchase order for switches arguably can be delayed nine months, but the centennial turn of the clocks is rapidly approaching. As we speak, technical managers might be choosing a Y2K fix over a networking switch as they determine 1998 budgets before the holidays. "I have it on my radar screen as a potential concern," says a buy-side analyst who works at a firm based in Connecticut. His firm owns shares of Cisco. Potentially, Y2K costs could carve into some of the rosy growth expectations for networkers. According to a survey by Cowen & Co. and Datamation magazine, two-thirds of companies will pay for their Y2K fix by removing money from network or other IT expenditures, rather than by increasing their overall IT budgets (portions of that study were released in September). "One big risk could be that new projects, as they come up at the end of this year, could get pushed to the back burner," says analyst Bob Wilkes at Brown Brothers Harriman, who covers the hardware suppliers Lucent (LU:NYSE) and Northern Telecom (NT:NYSE). He says he is keeping a watchful eye on the Y2K effect on the two stocks, both of which he currently rates as holds. Y2K issues are swiftly becoming a big wild card in the already chancy game of predicting earnings for the networkers. It's no joke -- investors don't hesitate to split hairs and sell shares when networkers fall even a penny shy of per-share estimates. While Cisco has motored ahead in the past year, competitors have had rockier experiences. At this point Cisco itself is proceeding somewhat blindly. "The anecdotal evidence of an impact on our business hasn't materialized yet," says spokesman Bob Michelet. Michelet adds that Cisco's customers have not sent a clear message just yet as to how they will juggle Y2K expenditures. Many companies, of course, would rather not confess to their Y2K sickness. IT managers at more than a dozen Fortune 500 companies did not respond to queries from TheStreet.com about spending plans. Of the parties involved, only Y2K specialists seem certain about the implications. "A lot of things are going to be put on hold," likely including network upgrades, says product manager Andy Kaufmann at RCG Information Technology, which helps companies in Philadelphia revamp their systems for Y2K compliance. He adds that most corporations are setting next year's budgets right now, and want to cure their systems in the next 12 months. Kaufmann also chairs a Year 2000 Special Interest Group in Philadelphia. Analyst Alex Arnold at H.C. Wainwright, a Boston-based investment bank, anticipates a spring flood in Y2K spending. "I think you'll see excessive spending in the second quarter, compared with what we have today." Arnold says IT managers likely will pull money from the overall computer-network budget for Y2K before turning elsewhere for funds.