From briefing.com today:
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Y2K Focus: Notebook Entries
Daily commentary updated for December 18, 1997
A quick listing of some of the recent events in the Y2K (Year 2000) stock arena.
Alydaar on NASDAQ, Options on CBOE
We wrote about Alydaar Software (ALYD 16 3/8) in September. This long time bulletin board stock finally made it to the NASDAQ listed system earlier this month. Just yesterday, the Chicago Board of Exchange announced that they will trade options on Alydaar stock. (Symbol base QDY, strikes at 12.5, 15, and 17, expirations in February, May, and August.)
Alydaar is a "pure" Y2K company, with little past revenue history, a Y2K software tool, a few big-name contracts, and company projections of $50 million in revenue in 98, and $100 million in 99. With 97 pretty much certain to be less than $10 million, this gives total revenue before the year 2000 of $160 million. Yet Alydaar has a market capitalization of $240 million (down from $400 million in September). With no clear story of where revenue comes from after the year 2000, Alydaar defies ordinary valuations.
Alydaar clearly does not trade based upon fundamental valuation. It is a speculative, emotion-driven stock. Now that options are available and the stock is shortable and more easily margined, volatility should increase with more liquidity. In the absence of fundamentals, technical analysis will be the only clue to the stock's direction. For traders looking to profit on volatility, this may be a good stock to study. But if you don't know how to read charts, and if you aren't willing to be long one day, short the next, you should probably let this one go by.
BMR Software Ready
Bob Bemer, whom we wrote about in October, has finished his Vertex 2000 product. Vertex 2000, from BMR Software in Dallas, is an automated solution to the Y2K problem, which does not require the extensive human intervention that other solutions require. The solution has created a great deal of excitement in the Year 2000 investment community because it drastically alters the labor intensive business model used by other companies.
Critics argue that the software cannot possibly be used in all situations, especially when date fields are not coded as DD/MM/YY or other six digit orientations. Supporters argue that most date fields are in a format where Vertex is applicable. However, now that the product is on the market, the market can decide. We will be watching BMR closely.
BMR Software is not a public company, but has stated 1997 revenues will be "nearly $5 million." Contract details have not been released.
First Y2K Class Action Lawsuit
Much of the public media press has focused on the "calamity" aspect of the Y2K problem: the air traffic control systems that will fail to land planes on Jan. 1, 2000, etc. The potential liability from these problems is hard to gauge, but most of the press has been on the excessively dramatic side.
This month, the first class action lawsuit on Y2K issues was filed, by Atlaz International, on behalf of all customers of SBT Accounting Systems, claiming that the company is unfairly charging for upgrades to the SetPro software product to make it Y2K compliant. Atlaz is a reseller of SetPro, and has 300,000 copies of the $500 product in inventory, but has sued for $50 million.
California State Assemblyman Brooks Firestone, perhaps in reaction to the above suit (filed in Marin County), has filed a bill to place limits on liability due from Y2K problems. The bill would eliminate all punitive damages, pain and suffering, and lost business revenues from recovery. Only costs "reasonably incurred to reprogram" a system would be recoverable. The intent is to protect software companies in California from unreasonable assault by settlement-seeking lawyers.
Congress files Bill to Require Disclosure
Representative Bob Bennett (R-Utah) has filed a bill to require all companies to disclose their current Y2K readiness. While many large companies are already asking their vendors to declare their state of readiness, Rep. Bennett wants every company to file a public report with the government. The bill is in committee now.
On the same note, the Gartner Group testified in November in front of the House Banking Committee on the urgent need to have publically traded companies disclose the status of their Year 2000 projects. They argued for a standardized system, which can be applied to all companies in order to make balanced comparisons between companies.
Guess who has just such a methodology already established and in place? The Gartner Group.
Federal Government Proactive, sort of
The problem has gotten high visibility in Washington, as President Clinton himself yesterday announced a focused effort on Y2K readiness. A recent study by Rep. Steve Horn (R-CA) showed only seven agencies on track for compliance. (EPA, Dept. of Interior, National Science Foundation, Nuclear Regulatory Commission, SBA, VA, and Social Security Administration.) Fourteen agencies were deemed "unlikely" to be ready, with the Department of Labor and Energy both projected to take until 2019 to be compliant. That's right, 21 years from now.
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