http://news.bbc.co.uk/hi/english/business/newsid_958000/958004.stm

The Millennium bug bites back
by BBC News Online's Mike Verdin

So the Millennium Bug may be getting the last laugh after all.

Ten months after it failed, as doomsters had predicted, to cause global mayhem, it is being implicated in a profits slump among US technology firms.

The Nasdaq index of technology stocks has tumbled 20% in a little over a month. The evening ring of Wall Street's stock exchange bell has come to signal not only the close of trade, but open season on profits warnings.

On 21 September Intel, the world's largest chipmaker, announced significantly lower revenues for the third quarter. A week later, computer giant Apple said income would fall "substantially below expectations".

On Tuesday it was the turn of software company Computer Associates to warn investors.

And on Wednesday SciQuest, BMC Software and most significantly Dell, the world's number two manufacturer of personal computers, followed suit.

Bug bites back

The reason? A fall in information technology spending by big corporate customers. They are cutting back after spending fortunes countering the Millennium Bug, which threatened to confuse as computers as they switched dates from the year of 1999 to 2000.

"Corporate spending on computer systems was strong in 1998 and 1999, in the run up to the millennium change," a senior analyst with investment bank Beeson Gregory told BBC News Online.

"What seems to be happening now is that spending is falling off, perhaps more seriously than had been thought."

A spate of UK software systems consultants announced early this year that takings were lower than expected.

"If companies implementing the systems were warning of a slow down then, it is not surprising that systems providers are saying the same now," the analyst said.

Currency effects

The weak euro is also being fingered as a culprit, for rendering US products expensive in the eurozone.

Intel, Apple and Dell all reported weak European sales.

"There has been some macro-psychology play at work with the weak euro," Dell's chairman and chief executive Michael Dell told analysts on Wednesday.

"People [in Europe] have been significantly less inclined to make expenditures in terms of technology."

Self interest

Indeed, analysts see more than a little self-interest being served by the co-operation of the US Federal Reserve in central bank intervention to boost the euro.

"The intervention is very directly connected to issues like Dell," said Paul Horne, economist at Schroder Salomon Smith Barney in London.

"The profits warnings of major tech companies have contributed to serious concerns about the rapidity of softening of the US economy."

-- Jim McAteer (jim_mcateer@hotmail.com), October 06, 2000

Answers

-- spider (spider0@usa.net), October 06, 2000.