In its 10-Q filed 11/98, Citigroup stated that the entire budget for Y2K remediation from 1996 to 1999 would be between $200 and $275 mil.

The Washington Post reports today that Citigroup now says it expects to spend $900 mil by the end of 1999.

That is a huge miscalculation in their first estimate! Makes me wonder at all the other gov. and private companies' estimate and the Gartner Group's so publicised $600 billion worldwide. (I read a while ago on another thread here that some other source which I forget who, said that Gartner Groups' estimate was off 3 times that amount.)

Citigroup's 11/98 10-Q

"The Company is in the process of implementing necessary changes, in accordance with its Year 2000 plan, to bring all its critical business systems into year 2000 compliance by early 1999. As part of and following, achievement of year 2000 compliance, systems have been, and will continue to be, subjected to a certification process which validates the renovated code before it is certified for use in production. In addition, the Company is developing contingency plans to be used in the event of an unexpected failure, which may result from the complex interrelationships among our clients, business partners, and other parties upon whom it relies. These plans are expected to be in place by December 31, 1998.

The total pre-tax cost associated with the required modifications and conversions is expected to be between $200 million and $275 million and is being expensed as incurred in the period 1996 through 1999, and is not expected to have a material effect on the Company's financial position, results of operations or liquidity."

Washington Post's report on Citigroup's statement.

"Citigroup said it expects to spend a total of $900 million by the end of this year to fix a computer problem associated with the onset of the year 2000. This weekend, Citigroup's Salomon Smith Barney investment bank unit and 400 other U.S. securities firms ran tests to see how their computers would handle trading at year-end. The tests went better than expected, an industry group said."

-- Chris (catsy@pond.com), March 09, 1999

Answers

Holy moley, its a good thing that those tests "went better than expected", otherwise one shudders to think how much more they would have had to allocate for Y2K remediation!

Y2K CANNOT BE FIXED!

-- Jack (jsprat@eld.net), March 09, 1999.

Some road. Some bump.

-- Old Git (anon@spamproblems.com), March 09, 1999.

Most companies began y2k work thinking it was kind of like putting a new coat of paint on a house. They made time schedules and budget allocations accordingly.

But as they got into it, they began to realize the job was more like having to replace every fifth nail in every part of the house--walls, floors, roof...everywhere.

The amount of work required (not to mention the disruption to the house) was much greater than expected.

Big outfits, like Citigroup, can dip into their vast coffers and cover the added expenses. But *nobody* can buy more time. This is why most firms are going to miss the deadline by a country mile.

-- rick blaine (y2kazoo@hotmail.com), March 09, 1999.

Not so fast. Some of the people at Citicorp are not idiots. Consider the possibility of a rope-a-dope strategy. Advertise to your competitors a $200 budget, all the while knowing that it will take five times that to do the job. At last minute, reveal true plans. Watch competition blanche.

Flip side of rope a dope? If I were a programmer, you'd have to pay me about 1% of Citicorp's total remediation budget to stay in Manhatten through rollover.

Staying in Manhatten during rollover? Got Zodiac inflatable + foot- pump?

-- Puddintame (dit@dot.com), March 09, 1999.

You're bucks are safe with us. Worry not! We are spending $275mil to make it so. Aargh! Found a few more flaws--- only need a few more bucks, like $900mil, to fix. Could flaw fixes ultimately eat up all shareholder's equity and some or all of deposits to boot? Will borrowing customers be in good enough shape to repay some of their loans to finance more of the FFFFF (Fatal Flaw Find Fix Fiasco)?

-- Watchful (seethesea@msn.com), March 09, 1999.

This is old news. Where have you been?

-- some (researcher@you.are), March 09, 1999.

If this is old news, would you please make yourself useful and post the URL to the thread where this was discussed? I must have missed it.

Puddintame, I wonder if indeed they'd go so far as to deceive like this, and how many company would/did. I still think that most truly had no idea how much it would cost until they started digging deeper.

-- Chris (catsy@pond.com), March 09, 1999.

If pressed I'd have to agree with you Chris. Just trying to stir things up a little.

-- Puddintame (dit@dot.com), March 09, 1999.

Chris

"Some" is right - this is old news:

http://www.bergen.com/biz/y2kmm199811251.htm

These costs were actually estimated I believe back in Sept. or Oct.

Shortly after that realization, they called it "restructuring":

http://cnnfn.com/hotstories/companies/9812/14/citigroup/

To include layoffs over 10,000:

http://cnnfn.com/hotstories/companies/9812/15/citigroup/index.htm

WHETHER OR NOT WE MAY REALIZE IT, Y2K IS ALREADY TAKING ITS TOLL!

-- @ (@@@.@), March 09, 1999.

Speaking of being in Manhattan at roll-over, I remember a few months ago reading a quote from Sen. Bennet that I have not been able to find when I went back to look for it. In the quote, he stated that a major bank, promised anonymity, told him that they had reserved every hotel room in Manhattan for the roll-over. The reason given was so that the bank could insure the safety of their programmers' families if the programmers were required to be on the job during Y2k disruptions. Has anyone else seen this quote, and do you know where it might be found?

-- Wanda (lonevoice@mail.excite.com), March 09, 1999.

Wow @! Thanks for those links. I don't recall this being posted here in Novemember and December. I just happened to see the Washington clip about it this morning.

So then, they new well in advance of posting their 10-Q in November of the $900 Y2k cost but instead said $275 in the report. Then they cook-up a "restructuring and job cutting" story for the press. This perticular instance indeed appears to be a direct y2K toll on the economy. I've been lead to believe that big corps could absorb Y2K fixes with no problems. How much of this is going on? I'm wondering about Sony's 17,000 job cuts now? How come this crazy market keeps going up?

Puddintame, after reading those links "@" provided, I'm not so sure they innocently discovered the magnitude of the Y2K projects later, but instead they chose to hide it from the stock holders. Then that brings into question other such 10-Q's that we've been relying on here for info.

-- Chris (catsy@pond.com), March 09, 1999.

Yeah, now you're starting to get the picture.

Last year was when these businesses finally got seriously into Y2K repairs, and that's when the CEOs started to see the reality of these unavoidable costs that they have been postponing for years.

So what are their options?

1. Tell the stockholders that they are spending millions of dollars on computer repairs that will have no effect on future revenues (other than preventing bankruptcy which of course could NEVER be mentioned!)? 2. Lower their prices and reduce their profit margin? (Hah! - No way in hell).

3. How about layoff 10 or 20 thousand employees, and tell them we're restructuring? Yeah - that's the ticket!! Stockholders LOVE layoffs!

There's been an awful lot of this going on for the last year or so - see earlier thread:

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=000TQA

Boeing did it, Bank of America, Motorola, and on and on.

Of course they will do their best to delay any of these costs being posted in their quarterly reports until it is no longer possible to hide them. The REALLY heavy financial burdens will show up next year.

And as Gary North has been saying for some time, the reason they can get away with this is because there is no severe penalty for "misjudging" their Y2K estimates. Most stockholders are not wise to what is really going on, so why not lie about their costs? You can sell your stocks, but if you try to warn other stockholders they will call you an internet lunatic!

The money has got to come from somewhere, and how many more people can they afford to lay off and still operate effectively? In an indirect way, the costs are being passed on to John Q. Public in the form of lost jobs and rising unemployment costs, etc. Stockholders may not realize it now, but sooner or later what comes around goes around, and it will HAVE to affect the economy as a whole, one way or another.

-- @ (@@@.@), March 09, 1999.

If revenues stay flat.....

Increased expenses. Lower profitability. Reduced dividents, not to mentioned dwindling retained earnings.

Think this will wake up some folks? Will it be a sell-off, a flight to quality?

-- Tim (pixmo@pixelquest.com), March 09, 1999.

Tim, good thoughts. But check your spelling and grammar before you post. If you're typing too fast, slow down. If you're tired, get some sleep.

-- Jenny (nosnart@GI.com), March 09, 1999.

Sorry. I'll try to do better :-)

-- Tim (pixmo@pixelquest.com), March 09, 1999.

Tim and Jenny,

You better watch that spelling and grammar. "Dividents" is not a word and "Tim, good thoughts." is not a sentence!! I am an anal retentive spelling Nazi and I promise you if I catch you making one mistake again you will be executed by firing squad. Now go back to sleep and don't wake up until you can spell!!!!

-- z (z@z.z), March 10, 1999.

hey! dis iz my tread and i makes up the rulez!

the wierderer de spellingz and grammer, de better! cuz dis way, everyone's kewl. Jus pay attentiun to what ya tryin ta say, k?

-- Chris (catsy@pond.com), March 10, 1999.