Technology: The Other Side Of 2000
By Eric J. Savitz
Well, here we are, less than 680 days until the air-traffic control system conks out, our credit cards become useless, the telephone network shuts down and the global financial system grinds to a halt. That's all supposed to happen, of course, because a bunch of COBOL programmers 30 years ago thought two digits would be enough to tell a computer the current year. By now, you've doubtless heard all the dire projections about the dreaded Year 2000 problem, including the forecast that the cost of fixing the mammoth software glitch will be in the neighborhood of $600 billion.
For investors, the Year 2000 problem was supposed to create billions in new wealth, as Corporate America spent wildly to avoid computational Armageddon. The Internet is littered with "Y2K" investment sites; online bulletin boards like the Motley Fool and Silicon Investor overflow with Year 2000 chatter. Somewhere along the way, however, reality has diverted away from expectations, Barron's reports.
In short, some of the highest-profile companies trying to solve the Year 2000 problem -- the Y2K stocks -- have turned into investment nightmares. Viasoft, long the best-known name in the millennium industry, a stock that as recently as last summer traded for more than $60 a share, has dropped to 30, hurt by disappointing results. Data Dimensions, which peaked last fall at close to 40, has plunged below 15. Zitel, which for one bright, shining moment a year ago topped 72, now changes hands for 12. Peritus Software Services, public for less than a year, has dropped to 15, from a peak of 32 just after it came out last summer. SEEC, which peaked last fall above 30, has slumped back to the high teens.
A second group of Year 2000 stocks, however, has continued to march higher. Keane has more than doubled since April. Micro Focus Group has soared from 10 to 50 in two years. Computer Horizons has zipped from less than 30 to more than 50 since November. Accelr8 Technology has run up from less than 10 to about 25 in a little over a year.(I think we know another company that fits in this group. i.e. TAVA has more than quadrupled since June)
What the heck is going on?
John Force, manager of PBHG Technology fund, notes that the stocks that have suffered the most, like Viasoft, Data Dimensions and Zitel, are of "magic-bullet" companies trying to solve the problem with software tools. Damian Rinaldi, an analyst with First Albany, observes that many companies seem to outsource their year-2000 work to companies like Keane and Computer Horizons rather than buying tools and doing it themselves. "There was a lot of anticipation that people would do more work in-house," Rinaldi says. "Expectations were for more rapid tool buying than has been the case." In other words, solving the biggest computing glitch of all times has been more effectively attacked with man hours than brain power. At the same time, some observers think Corporate America continues to underestimate the time and money involved in fixing the problem. In a recent report, Forrester Research asserts that large companies have underestimated by 25% the work required for Y2K assessment, repair and testing.
"So instead of being nearly done, large companies are only 34% through the job, on average," Forrester contends. "Even if Y2K teams can accomplish twice as much work in 1998 as they did in 1997, they will have finished only 68% of the total job by December 31, 1998. When users wake up to this reality, the demand for Y2K help will escalate." Over the next 24 months, Forrester predicts, year-2000 service providers will be able to choose the work they want to do, increase prices -- by 15% a year -- and dictate contract terms.
DOW JONES NEWS 02-21-98 05:17 AM
Obviously this is about COBOL and not embedded systems, the reason I posted it here was to demonstrate that Everyone is dragging their feet on this problem, and those with factory floors are no exception. I think, when it reaches the eleventh hour for embedded systems, THAT is when we'll see the TAVA CD-ROM and database selling "like popcorn." Of course, Cheryl will be out there pitching for action sooner, and I don't think we should underestimate the effect of all those Y2K disclosures, now required for the first time by the SEC, that will be coming out in the April 10Q's.
Zebra |
