Is Millennium Bug A Fly In PC Firms' Ointment?
Date: 4/14/99
Author: Nick Turner and James DeTar for IBD
While the clock ticks, the guessing continues: Will the Millennium Bug be a blessing or a curse for makers of personal computers?
The next few months should give the answer. Most observers consider April through June to be crunch time for Year 2000 preparations.
There are two theories on the effects of Y2K:
Companies might buy more computers in an effort to clean house.
Or they'll be tapped out by having spent so much money fixing existing machines that they'll buy fewer PCs.
''You could make a pretty good argument either way,'' said Steve Baker, an analyst at research firm PC Data Inc. in Reston, Va.
But the uncertainty in itself might spell trouble for the industry. If there is a rush of orders, makers -which have spent the last few years whittling down inventories to cut costs -might not be able to respond in time.
''Y2K is very much a wild card,'' said Dave Morse, a product manager at Hewlett-Packard Co. in Palo Alto, Calif.
Fixing computer systems to recognize the year 2000 has been a massive undertaking. Many pre-1994 - or even later - computers were programmed to read just the last two digits of a year, with ''19'' as the first two digits. Computer systems that read the wrong year might have troubles.
The problem is the computer's clock. It goes back to the original IBM Corp. personal computer design. The clock in a PC is a piece of software that keeps track of the time, day and year.
Designers tried to save a couple of precious bits of processing power in those early systems. So they designated the year using only two digits.
The bug actually is in a piece of software called the BIOS, or basic input-output system. The BIOS is located in a group of chips - a chipset - that accompanies the main processor. Intel Corp. and others make these chipsets.
Newer chipsets don't have the problem, but Intel officials aren't specific about how long Y2K-ready chipsets have been shipping.
''They've been available for a long time from a number of vendors,'' said Louis Burns, Intel's vice president of information technology.
What's clear is that new PCs should be free of the glitch. To avoid headaches, some companies will just chuck their old machines and buy new ones.
But other companies might spend so much time and money fixing problems in their existing mainframes, servers and PCs that they'll put off buying new machines.
Makers of personal computers and chips aren't predicting boom or bust just yet - but some are making contingency plans.
Intel, the No. 1 chipmaker, says some PC makers are stocking up on processors.
''Certain geographic areas will front-end load,'' said Intel spokesman Bill Calder. ''In other words, they will stock up to avoid a shortage - particularly in the U.S., where they are further ahead in terms of awareness of the issue.''
Many large U.S. firms already have fixed their Y2K problems. In other countries, businesses may be slower to address the problem. And that will affect their PC spending.
''Asia just focused on staying alive last year,'' said Dan Niles, an analyst at BancBoston Robertson Stephens in San Francisco. ''They could have cared less about Y2K. So this year, you have those countries playing major catch-up.''
Intel says it will keep a reserve of chips on hand in case there's a spike in demand.
Some PC makers aren't predicting many fireworks. Apple Computer Inc. used the fact that PCs running Microsoft Corp.'s Windows operating software may not be Y2K compliant as a selling point for Apple's Macintosh computers, which do comply.
Still, Apple officials don't expect the bug to have much of an impact on its own sales.
Others, such as HP, are taking a wait-and-see approach as they gauge the impact.
''That is the $64,000 question,'' Morse said. ''We're trying to understand it, as is everybody else.''
Managing PC demand already is trickier than ever. Dell Computer Corp. has helped push the industry into a new era of efficiency.
Dell keeps its inventory lean by selling directly to customers. Typically, it has about a week of stock on hand.
Other PC makers have leaned on their parts suppliers, as well as their distributors and resellers, to try to match that efficiency. And they've largely succeeded.
According to a recent report from Deloitte Consulting, a unit of New York-based Deloitte Touche Tohmatsu, the inventories held by PC makers, dealers and parts suppliers are at a five-year low.
In addition to Intel, other chipmakers may stockpile chips. Mike Brumage, Advanced Micro Devices Inc.'s headquarters sales manager, says some AMD PC customers plan to take extra inventory by year-end in preparation for Y2K. ''We don't know what that bubble looks like yet, though. I think the industry will have a better idea on inventory in the third quarter,'' Brumage said.
National Semiconductor Corp. says for now it doesn't have any plans to stockpile chips.
Still, most analysts feel PC makers are better off staying lean and efficient. Compaq Computer Corp., the No. 1 PC maker, had a well-publicized inventory glut last year.
Compaq officials had no comment on their Y2K expectations. On Friday, however, the company said its first-quarter sales and profit wouldn't meet analysts' expectations. Executives blamed lower PC prices and lower-than-expected demand for business PCs.
One factor that might help PC sales is that most companies already have spent most of their budgets to fix Y2K glitches.
But other matters may cloud the picture. Many businesses are waiting to upgrade their PCs until the arrival of Microsoft's Windows 2000 (formerly Windows NT), an operating system for networked computers. It's expected out by year-end. |
