A Merril Lynch report on Y2K Compliance - Interesting point.
The companies surveyed all seem to feel they will be compliant by 2000. However, they are worried about suppliers. Interesting though, one companies supplier may be one that is surveyed. That is, everyone seems worried about everyone else. That said, IMHO all still have a big problem.
article follows
Dan
Merrill Lynch Issues 'Y2K: Implications for Investors' Global Survey Assesses Corporate Readiness for the Year 2000
NEW YORK, July 9 /PRNewswire/ -- Corporations across the globe are making aggressive efforts to tackle the Year 2000 problem, and most should be able to do so in time for the millennium, according to a major report, "Y2K: Implications for Investors," released today by Merrill Lynch.
"Most companies have been working on their Y2K projects for two years and there are one and a half years left," said the 450-page report produced by Merrill Lynch Global Securities Research & Economics. "Microsoft, Latin America and Communism all changed radically in a lot less time."
"Merrill Lynch conducted a detailed worldwide survey of thousands of corporations to gauge how prepared they are for the year 2000, and to assess the impact of these efforts for investors," said Rosemary T. Berkery and Andrew J. Melnick, directors of Global Securities Research & Economics.
This is the third in a series of reports utilizing the depth and breadth of Merrill Lynch's global research team to address issues of concern to investors.
"In general, companies are reasonably confident of their own Y2K preparations, but uncertain about those same efforts by their suppliers and customers," they said. "Few companies expect earnings to be noticeably affected by Y2K expenses, although the cost of compliance is reported to be higher in the U.S. than elsewhere."
The real earnings impact, if there is one in 2000, is likely to be the result of some revenue shortfall in the short term if systems problems impact operations and companies are unable to ratchet down costs quickly.
Likening the Y2K to a space shuttle flight, the report said, "We do not see Armageddon, but like every space flight so far, there is an element of the unforeseen. If there are glitches, and there always are, companies expect to manage their way through them as they do in power blackouts, and as they did when the AT&T and AOL networks have occasionally shut down."
Many observers have seen the complexity of networking and interfacing systems as increasing the potential for a year 2000 meltdown. "Our own view is that the very complexity and dispersion of these systems is, in fact, insurance against a complete shutdown of commerce when the millennium starts," the report says.
"There won't be a domino effect, because there are lots of switches throughout the system that will put on brakes," said top-ranked analyst Jeanne G. Terrile, who authored the overview of the report.
"One of the great ironies of the Y2K issue, which is about the simplest of things -- the ability to write the correct date -- is that it is exacerbated by virtually every modern management practice," she said.
Among these, she points to just-in-time inventory practices and outsourcing as having left companies more vulnerable to a crisis beyond their own walls. Globalization and decentralization mean that many companies are working at very different levels of sophistication in different markets, further increasing points of vulnerability. And with the recent wave of mega mergers and alliances companies may have to both upgrade and integrate systems at the same time.
In the US, most corporations surveyed expect to be fully compliant by year-end 1998. In Europe, many firms are using the Y2K, combined with the introduction of the Euro, as an opportunity to upgrade their systems.
Merrill's team in Japan sees a real silver lining in the Y2K. Historically, many Japanese companies relied on customized software to run their businesses and this often resulted in inefficiencies. The report says that a focus on Y2K compliance should result in the implementation of more standardized software and open systems, enhancing efficiencies.
The report also found that although most Asian companies are in the early stages of addressing the Y2K issue, many major Asian banking systems are newly automated, and therefore, they are Y2K compliant.
In China, most big industries are looking to central agencies of the government for direction. Because Y2K compliance does not seem to be a priority there, Chinese industries, such as airlines, could be left vulnerable.
Of the 460 Asian companies surveyed, 72% expect to be Y2K compliant. India and the Philippines top the list, with expectations, respectively, of 97% and 86% compliance. In Indonesia and China, fewer than half of the companies surveyed expect to be Y2K compliant.
In Australia/New Zealand, and South Africa, almost all leading companies surveyed said they believe they have the Y2K issue under control, and have procedures in place to control the millennium bug. In Latin America, most companies expect to be Y2K compliant, although the Brazilian telecommunications industry, where Y2K compliance is competing with the demands of privatization, is a concern.
Copies of "Y2K: Implications for Investors," are available upon request.
SOURCE Merrill Lynch & Co., Inc.
CO: Merrill Lynch & Co., Inc.
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