Study finds 94% of S&P 500 firms on track toward Y2K goal

06/04/99

By Alan Goldstein / The Dallas Morning News

Corporate America appears well on its way toward being prepared for the millennium bug, with 94 percent of companies in the Standard & Poor's 500 index expected to have their computer systems compliant by September, a leading investment strategist said Thursday.

Overall, the total bill for S&P 500 companies, which began repairing and replacing computer systems several years ago to fix Y2K problems, is expected to reach between $34 billion and $35 billion, said Peter J. Canelo, U.S. strategist for Morgan Stanley Dean Witter & Co. in New York.

Though the figure represents a substantial investment, it still amounts to only 0.7 percent of revenue for the past 12 months at large publicly traded companies, said Mr. Canelo, speaking with reporters before presenting his new Y2K report to investors in Dallas.

Morgan Stanley Dean Witter gathered most of its data about S&P 500 companies by studying filings with the Securities and Exchange Commission. Total public and private spending in the United States is expected to reach $80 billion to $86 billion, the report said.

The Year 2000 problem was created in the late 1950s when programmers sought to use two-digit shorthand to represent years in computer data. But if computers go unfixed and read 2000 as 1900, that can cause serious problems.

The risk of a recession induced by the Year 2000 problem is diminishing, Mr. Canelo said, as companies and governments have grown more serious about making their systems compliant. He now estimates the chance of a Y2K-induced recession at less than 10 percent.

The federal government's critical systems are 92 percent compliant, Mr. Canelo said, which is farther along than he had expected.

The chance that the millennium bug could cause a bear market is also minimal, Mr. Canelo said, given the expected state of readiness.

Mr. Canelo said he is increasingly confident that critical service companies are well prepared for the Y2K problem, including providers of financial services, electricity, telecommunications and transportation.

Less-prepared companies tend to be smaller and have minimal impact on other businesses, Mr. Canelo said.

The main beneficiaries of all the investment in Y2K remedies have been technology companies, Mr. Canelo said. "What appears to have happened is a Y2K bubble was created in demand for applications software, personal computers and servers."

But Mr. Canelo said he thinks many observers of high-tech companies who have been predicting a "nuclear winter" for computer and software makers later this year are misguided. The theory is that sales will freeze as companies lock down their systems to wait for the new year.

Mr. Canelo said he does not expect a freeze, in part because the technology industry itself is diverse enough that specific product categories are exposed to Y2K issues in varying degrees.

Once companies achieve Y2K compliance by the fall, as expected, financial resources will become available to meet pent-up demand for deferred projects, leading to renewed spending in early 2000, he said.

Concerns about lower Y2K preparedness overseas, particularly in China and certain other parts of Asia, will lead companies to stockpile inventory of components and raw materials later this year, Mr. Canelo said.

But as concerns about Y2K problems in other parts of the world spread, Mr. Canelo said, U.S. investments could benefit if they are perceived as a safe haven.

-- Norm (nwo@hotmail.com), June 04, 1999

Answers

This article has already been posted and is being discussed on the following thread:

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

"S&P 500 Status"

-- Linkmeister (link@librarian.edu), June 04, 1999.

Interesting, he's predicting a bigger chance of a recession than before though; since "nobody" thought it would happen before. Now, only ten percent?

<>

-- Robert A. Cook, PE (Kennesaw, GA) (cook.r@csaatl.com), June 04, 1999.

Snip:

"94 percent of companies in the Standard & Poor's 500 index expected to have their computer systems compliant by September, a leading investment strategist said Thursday."

Let's see, originally 100% of ALL S&P500 companies were supposed to have 100% of their remediation done by 12/31/98 thus leaving a full year for testing. Does anyone detact a problem here?

Peter Canelo is a SHILL for the Investment Industry. He should stick to what he knows best, SHILLING.

Ray

-- Ray (ray@totacc.com), June 04, 1999.

On May 17, N.Y. Times On the Web reported on a Cap Gemini survey carried out by Howard Rubin. The respondents from the nation's largest companies were typically CIO's and project managers. Twenty-two percent said they do not expect to have all critical systems tested and ready by Jan. This figure was up from 16% in Nov. and 12% last Aug. The article didn't say whether the poll was anonymously taken, nor the exact number of large companies polled.

-- Bill Byars (billbyars@softwaresmith.com), June 04, 1999.

For the benefit of our resident pollyannas, let's have a refresher course on the English vocabulary:

When a task is over, it is said to be

completed
done
finished
concluded
accomplished
fulfilled
ended

When a task is not over, it is said to be

on track
on schedule
almost there
progressing nicely
looking good
nearly done
meeting expectations

When a remediation task is over, it is said to be successful.

-- a (a@a.a), June 04, 1999.

Corporate America appears well on its way toward being prepared for the millennium bug, with 94 percent of companies in the Standard & Poor's 500 index expected to have their computer systems compliant by September, a leading investment strategist said Thursday. 

This is BS. First the deadline was 12/98. It passed. Number compliant:0. Then the deadline was 3/99. It too passed. Number announcing compliance: 0. Then the deadline was moved again to 6/99 or 9/99. Even if they were actually ready, what about the thousands of suppliers they depend on that are nowhere near ready?

Overall, the total bill for S&P 500 companies, which began repairing and replacing computer systems several years ago to fix Y2K problems, is expected to reach between $34 billion and $35 billion, said Peter J. Canelo, U.S. strategist for Morgan Stanley Dean Witter & Co. in New York.

More BS. The money budgeted to fix Y2K has grown steadily, and is still growing. Amazing isnt it, for such a non-problem? Oh yeah, there is also the estimated $1 TRILLION in litigation coming as the Y2K swan song. And lets see, they started several years ago yet none are completed. The S%P futures trade on the GLOBEX. Some countries, yes whole countries, HAVE NOT EVEN STARTED YET.

-- Rob Michaels (sonofdust@com.net), June 04, 1999.

Lies. Damn lies. Statistics.

Believe them at your own risk.

The clock is ticking. Time will tell.

-- Lee (lplapin@hotmail.com), June 05, 1999.

"Will Corporate America Beat Y2K Deadline?"

http://www.webcom.com/yardeni/y2kbook_part2.html#2.B5.1

-- Linkmeister (link@librarian.edu), June 05, 1999.