Dear Reader,

The attached Baltimore Sun article focuses on the lackluster stock performance of Y2K companies. One possible conclusion: there is less work or profit in Y2K remediation than orginally thought. It seems a great deal of Y2K remediation has been accomplished in house and more quickly than anticipated. For example, this weekend the Baltimore Gas and Electric Company (BGE) reported its progress on Y2K compliance testing.

There is stable supply Y2K remediation assets like Cobol programmers and remediation firms. Given the fixed deadline and the large number of firms with information systems, one might expect strongly increasing demand. Given the considerable media attention over Y2K, it is difficult to argue that firms are not aware of the issue.

According to the laws of supply and demand the salaries of Cobol programmers and the stock of Y2K remediation firms should be rising. This it what happens when increasing demand faces a limited supply.

As of yet, this is not happening. There are several possible explanations. With the quiet "critical" days thus far, the lack of strong "price signals" to the Y2K remediation marketplace may be seen as positive news.

The lack of demand for external remediation assets suggests one or more of the following alternatives: 1) firms are making good progress without assistance, 2) firms are trying to hide a lack of progress, 3) firms plan to fix on failure or 4) firms are completely unaware of the problem.

Given my knowledge of the business community, I favor the first alternative in most instances.

Mr. Decker

http://www.baltimoresun.com/cgi-bin/editorial/story.cgi?section=news-business&storyid=1150070216444

"Not much left among Y2K stocks Analysts favor Keane, the best of the worst --------------------------------------------------------------------------------

ANALYSTS are high on Keane Inc., a computer software consulting firm that solves Year 2000 computer glitches for other companies.

Of the two dozen analysts who track Keane, 21 are advising investors to buy the stock, even though its shares have been punished, and trade at a mere $21.125, down from a high in July of $60.9375.

But the Boston-based firm is about as good as it gets in the world of Year 2000 fix-it companies.

Shares of these once high-flying operations have been trashed, and even the analysts are no longer excited about prospects for the industry.

"I don't have any favorites," said William Loomis, managing director of the technology research group at Baltimore-based Legg Mason Wood Walker Inc., who noted that performance of Y2K stocks in general has been "terrible."

The carnage has been widespread, even among highly regarded companies like Keane, which analysts believe is well positioned to bring in business after the turn of the millennium.

Computer Horizons Corp. of Mountain Lakes, N.J., for example, rocketed to a high of $50.50 a year ago, and now trades at $9.9375. Clearwater, Fla.-based IMRglobal Corp. reached $41.875 last April 16, and now trades at $14.875; and Cognizant Technology Solutions Corp. of Teaneck, N.J., hit $48 Feb. 16, but has slipped to $20.50.

The Year 2000 issue "has been a big problem, but it hasn't been of the scale people thought it was going to be," Loomis said.

There are hundreds of companies that claim to solve Year 2000 glitches, and many of them are small. They can be separated into two groups: "tools companies," which design software to clean up bugs that can crash computers, and "service companies," which employ technicians who go into corporations and modernize the systems.

Banks, air traffic control operations, manufacturers and brokerage houses are spending billions to make sure their computers don't melt down Jan. 1, 2000.

Y2K stocks zoomed about a year ago, driven partly by fear of disaster. If computers weren't fixed, experts argued, power plants would shut down leaving big cities in the dark, airplanes would fall out of the skies, and bank records would vanish because computers would have mistaken the "00" in 2000 for 1900.

"Investors and some of the Y2K alarmists painted dire pictures of what would happen at the beginning of next year and how big a challenge many companies face," said Thomas E. Browne Jr., equity analyst at New York-based Prudential Securities Inc. "Companies went out and positioned themselves to take advantage of it."

Investors threw money into many small, obscure Y2K companies, such as Peritus Software Services Inc. and Information Analysis Inc. Peritus rose to a high of $7.50 a share July 20, and now trades for 15.63 cents, while Information Analysis trades at 43.75 cents, down from a high of $16.375 April 21.

After a quick flight, Y2K companies were brought back to earth. One reason is that corporate spending for upgrading computer systems has fallen far short of estimates.

Deutsche Bank Research, which tracked the Y2K expenditures of more than 300 Standard & Poor's 500 companies, found they spent $10.6 billion as of Sept. 30, well below the $25 billion that was budgeted.

In addition, there has been a growing belief that business for many of these Y2K companies will dry up after the new year. And to an extent, the firms have been their own worst enemy.

They are "fixing the Y2K problems faster than people thought at less cost," Loomis said.

Still, the analysts haven't given up on the group. There are companies that have booked business well beyond the millennium.

Plamen Petkov, a software and computer analyst at New York-based Jackson Partners & Associates, likes Keane, but also favors Computer Horizons.

"They will come up as a strong company and continue to grow at a higher overall rate to the industry," he said. "Given the fact where the stock is, I think there is appreciation potential."

He also likes Computer Task Group Inc. because it is not too heavily focused on Y2K, and has been expanding its business into more profitable technology service areas as well as beating analysts' quarterly earnings estimates. The stock trades at $17, down from a high of $40.875.

"The company is well positioned to deliver solid results in the future," he said.

Some investors are betting that Y2K stocks will shoot higher as the millennium draws to a close, as companies realize additional work is needed. There is also the outside chance that cities will go dark, and planes will fall from the sky in January.

Loomis doesn't believe these disasters will happen, and he doesn't expect the beaten-up Y2K stocks to shoot up anytime soon.

"We just don't see that burst of activity anymore," he said.

Originally published on Apr 11 1999

Ironically, the

-- Mr. Decker (kcdecker@worldnet.att.net), April 11, 1999

Answers

There are a few other possibilities (in addition to the ones you mention). One, not all of the work is getting done. This is what some of the top Y2K lawyers believe. Two, a lot of firms elected to fix their problems in-house. This has had the unfortunate, but quite real, side effect of failing fixes, as has been documented by various testing companies.

-- Drew Parkhill/CBN News (y2k@cbn.org), April 12, 1999.

It seems a great deal of Y2K remediation has been accomplished in house and more quickly than anticipated.

Mr. Decker,

If that's true, then most of the business community would have finished their remediation by the originally suggested end of 1998. We know that didn't happen.

-- Kevin (mixesmusic@worldnet.att.net), April 12, 1999.

"Fortune 500 - Scheduled Internal Remediation"

http://www.flybyday.com/y2k/remediation.htm

-- Kevin (mixesmusic@worldnet.att.net), April 12, 1999.

Mr D.

A few other possibilities:

1) COBOL wages haven't risen because Congress shafted the American programmer community by allowing hundreds of thousands of additional programmers into the country on work visas.

2) Earnings have peaked on the publicly traded remediators perhaps because the remaining potential clients have decided it is too late to start a major Y2k effort. Note that the stock price of SAP has been collapsing, too. A SAP installation takes a couple of years to do right, and maybe half that time to do a hatchet job.

3) The remdiators don't want to risk not being able to complete a contract, due to liability reasons.

4) The remediators are already stretched too thin to take on new, risky projects at this relatively late date.

5) The word has gone out far and wide in lawyer land that the remediation companies will become prime targets for Y2k failure lititgation and the market has quietly caught wind of this.

6) The market is prepping for the "last ditch effort" by forcing a selloff now in order to establish a better entry price going into an spectacular fall rally in these shares.

7) Same as above, but instead of "last ditch effort", the remediators are being trashed so that they may be accumulated over the next few quarters for an expected burst in activity on the other side of rollover.

8) The market is so thin that everything is being sold -- even strong earners -- in order to buy the profitless, high-momentum, internet trash while simultaneously attempting to maintain the illusion of the bull market by dumping all available funds into index stocks.

-- Nathan (nospam@all.com), April 12, 1999.

A lack of Y2K work in small business is not due to a lack of need. I've lost count of the number of small business clients that have told me they don't have any Y2K problems because they've replaced "most" of their hardware within the last year or two. With testing, we have found many with 1/4 to 1/3 of their hardware being non-compliant. And most of them don't understand that the other elements of OS's, applications, data files, etc also come to bear on this situation. We're finding a similar number (percent) of problems in these other areas. But most small business owners think they're okay if they've replaced 6 out of 10 computers. And as a whole, they're not going to spend money on something they don't perceive as a problem.

-- Greg Sugg (gregsugg@bbnp.com), April 12, 1999.

Mr. Decker

It would seem that Chevron has only spent 30% of it's expected budget in their 10-K filing dated March 31. Of course this means nothing as nobody knows what is going to happen.

None the less thanks for your opinions, I liked your common sense stuff in a previous post to. Personally Y2K is a Russian Roulette game. Except we don't know how many chips I mean bullets are loaded in the computer I mean gun.

Brian

http://www.edgar-online.com/bin/cobrand/ ?doc=A-93410-0000093410-99-000034&nav=1

<<p><B>Form 10-K for CHEVRON CORP filed on Mar 31 1999 12:00AM</B><PRE>        & nbsp;          & nbsp;          & nbsp;       1998=================================================================== =============         & nbsp;      UNITED STATES SECURITIES AND EXCHANGE COMMISSION   & nbsp;          & nbsp;          & nbsp;   Washington, D.C. 20549        & nbsp;          & nbsp;          & nbsp;     Form 10-K|X|  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE     ACT OF 1934           & nbsp;       For the fiscal year ended December 31, 1998    & nbsp;          & nbsp;          & nbsp;            OR|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES     EXCHANGE ACT OF 1934For the transition period from   & nbsp;         to           & nbsp;          & nbsp;        -----------    -------------    & nbsp;          & nbsp;          Commission File Number 1-368-2      & nbsp;          & nbsp;          & nbsp;  Chevron Corporation        & nbsp;    (Exact name of registrant as specified in its  charter) & nbsp;          & nbsp;          & nbsp;          & nbsp;        575 Market Street,   Delaware     & nbsp;   94-0890210          San Francisco, California      94105 ----------------  - --------------     -------------
 

YEAR 2000 PROBLEM.The Year 2000 problem is the result of computer systems and other equipment withembedded chips or processors using two digits, rather than four, to define aspecific year and potentially being unable to process accurately certain databefore, during or after 2000. This could result in system failures ormiscalculations, causing disruptions to various activities and operations.

Big snip (Bla Bla)

The company utilizes both internal and external resources in its Year 2000efforts. The total estimated cost to achieve Year 2000 compliance isapproximately $250 million, mostly for expense-type items, not all of which areincremental to the company's operations. Approximately $75 million had beenspent through December 31, 1998. Most of the remaining expenditures will beincurred in 1999, with the rate of expenditure expected to increasesignificantly in 1999. The foregoing amounts include the company's share ofexpenditures by its major affiliates.

As part of the Securities and Exchange Commission's reporting requirements onthe Year 2000 problem, companies must include a description of their "mostreasonably likely worst-case scenarios" from potential Year 2000 issues. ForChevron, its business diversity is expected to reduce the risk of widespreaddisruptions to its worldwide operations from Year 2000-related incidents. Thecompany does not expect unusual risks to public safety or to the environment toarise from potential Year 2000-related failures. While the
 company believes that the impact of any individual Year 2000 failure most likelywill be localized and limited to specific facilities or operations, it is notyet able to fully assess the likelihood of significant business interruptionsoccurring in one or more of its operations around the world. Such interruptionscould delay the company from being able to manufacture and deliver refinedproducts and chemicals products to customers. The company could also faceinterruptions in its ability to produce crude oil and natural gas. While notexpected, failures to address multiple critical Year 2000 issues, includingfailures to implement contingency plans in a timely manner, could materially andadversely affect the company's results of operations or liquidity in any oneperiod. The company is currently unable to predict the aggregate financial orother consequences of such potential interruptions.

The foregoing disclosure is based on Chevron's current expectations, estimatesand projections, which could ultimately prove to be inaccurate. Because ofuncertainties, the actual effects of the Year 2000 issues on Chevron may bedifferent from the company's current assessment. Factors, many of which areoutside the control of the company and that could affect Chevron's ability to beYear 2000 compliant by the end of 1999, include: the failure of customers,suppliers, governmental entities and others to achieve compliance, and theinability or failure to identify all critical Year 2000 issues, or to developappropriate contingency plans for all Year 2000 issues that ultimately mayarise. The foregoing disclosure is made pursuant to the Federal Year 2000Information and Readiness Disclosure Act.

-- Brian (imager@ampsc.com), April 12, 1999.

Big business learned real fast that the "consultants" were unable to fix the mainframes, yet spent a discusting amount of time and money on setting up for the remediation. Just a year ago and less the consultants were naming so many things that "had to be done" before even starting changing the programming. Word spreads fast in big business when they are being scammed as apposed to everyday people. They DO talk to each other and even if competing, have a certain respect for each other. They make big profits because they are smart. And they were smart enough to see through all the suddenly emerging "Y2K consulting firms". They went to their own people who knew (and had already known in a lot of cases) what needed to be done and who needed to do it. Now it looks like the "embedded scam" is being proven to have been exagerated for the simple reason for greed. Amy person with eperience can and will "troubleshoot" any embedded system without even having to lay their hands on it and know if there is a potential problem. There are so many stories, especially on this board about problems being found. What is not said is that almost every one of those problems is due to the software running through the chips or systems and not any problem with the chip or system itself. There are almost nothing but software patches or update and in some cases entire software program changes. Very few if any physical changes or replacements of components. And the few that do need changed, they are the programmable ones. Most were programmed (not coded, this isn't the moorse code) without problems because those who "programmed" the programmable chips never tried to add unecessary, unneeded problems to such as unnecessary date functions.

Umm what was this thread about again?

-- Cherri (sams@brigadoon.com), April 12, 1999.

IMO, a lot of the posts have contributed accurate pieces here on many sides, intra-corporate as well as Wall Street. But, in the end, there is less here than meets the eye.

The market, including the smart money, has no clue about Y2K and is playing conventional wisdom. Run-up early corresponded to Las Vegas style bets on Y2K being "bad". Now, conventional wisdom calls for a bump (despite the, um "outside chance" that "planes will fall from the sky". Good to see the analysts are still hot on the trail).

Where is the mystery? And why would anyone think it indicates anything meaningful about Y2K? Y2K as present reality and potential impact is outside the scope of the analyst's spreadsheets and their "inside info" doesn't know anything.

-- BigDog (BigDog@duffer.com), April 12, 1999.

not all the y2k stocks are losers. about a week ago, the price of Intelliquis went up over 21% in one night.

-- jocelyne slough (jonslough@tln.net), April 12, 1999.