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Profits of Doom

How a costly computer glitch turned into a once-in-a-millennium bonanza for high-tech companies.

In fact, the strongest evidence of the seriousness of the Y2K threat may be the emergence of a booming market for technology companies that offer the critical tools and services necessary to fix the problem. Some of the operations are clearly flashes in the pan--what Welty describes as "Two Guys Millennium Service" operating out of someone's garage--but others are solidly positioned to reap staggering revenues from the crisis. While corporate America is literally getting its clock cleaned, these companies--including several key players in Colorado that were all but unknown two years ago--are displaying growth curves that resemble the slopes of Annapurna.

"If we'd gone out to create a problem to stimulate our business, we couldn't have created a better problem than Y2K," says Tim Fitzpatrick, vice president of sales for Accelr8 Technology Corporation, a Denver company that's seen its earnings skyrocket over the past year and a half, largely on the strength of its Y2K software tools. "Yes, there is a lot of hype out there, but there is a real problem, too."

The Y2K evangelists at Hanifen Imhoff have seized on the phenomenon as a golden opportunity for investors; Welty and assistant Lance Marx issue a monthly newsletter charting the growth of Y2K-related stocks and tracking what banks, major corporations and governments are doing to fix the problem. They're hardly alone in such efforts, yet most high-powered investment firms have been slow to jump on the bandwagon. In many quarters, the dreaded Millennium Bug is still regarded as an affliction to be dealt with in private, like a nasty skin disease. Welty sees the tide turning, though, thanks in part to new, tougher Securities and Exchange Commission rules requiring publicly traded companies to provide more detailed disclosure of how they're coping with their computer nightmare.

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"Most companies don't want their name publicly associated with the problem," Welty notes. "They're not even letting their [Y2K] vendors announce the contracts. But that's beginning to change. Instead of people hiding that they have a problem, it's going to become a benefit to say that you've hired somebody to fix this."

Bill Storrison, president of Ciber Information Services, a division of Ciber Inc., wants to make one thing perfectly clear: The fate of his company does not hinge on what happens on January 1, 2000. In fact, Ciber has "worked hard at not being known as just a Year 2000 company," he says.

"Not that there's anything wrong with that," he adds, with Seinfeldish alacrity. "But our business right now is running close to $500 million a year, and we're going to be a viable company in 2001, 2005, whatever."

The Englewood-based company was launched in 1974 as a computer-oriented temp agency, supplying programmers to short-staffed businesses. Over the years, through a series of aggressive acquisitions and the cultivation of Fortune 500 clients, it has blossomed into a techno giant offering a range of consulting services, staffing and software implementation to the likes of IBM, American Express, Ford, AT&T and US West.

In late 1995, Ciber became a publicly traded company, with Hanifen Imhoff as underwriter (a relationship that's dutifully disclosed in Welty's newsletters tracking Ciber's growth). The stock, which started trading at around $4 a share, rose to the low twenties within a year. Twelve months further down the road, it's in the low sixties.

Barry Ollman of Hanifen Imhoff views Ciber's surging business as a dramatic example of how much corporate America, after a wave of downsizing, has come to rely on "outsourcing" for much of its technology needs. "Big companies are becoming more and more overwhelmed by the complexity of their computer issues," he notes. "Outsourcing was the theme well before the Year 2000 issue came along."

At present, Y2K-related business accounts for only about 10 percent of Ciber's revenues. The exact figure is hard to nail down, Storrison says, since employees in his division may be working with clients on Y2K as well as other problems. In addition, the company's Ciber2000 Group has established what amounts to a Y2K factory, where more than fifty employees work on "off-site renovation": Companies ship their entire computer code to Englewood, and Ciber ships it back, weeks or months later, with the glitch corrected.

Yet the Y2K threat is definitely having a ripple effect on Ciber's other activities; companies struggling with the millennial blues may opt for new software (one Ciber acquisition, Business Information Technology, provides support for the popular PeopleSoft business-software package) or other services. And with 4,300 employees situated in subsidiaries around the country, the company represents a sizable pool of skilled workers for what promises to be a highly labor-intensive job. Although much of the demand is still to come, programmers who know COBOL--an antiquated computer language used in many mainframe systems--are already in such short supply that some are commanding fees in excess of $100 an hour, compared with $40 a few months ago.

Storrison says Ciber is "investing heavily in recruiting" to head off a labor shortage. "It's an ongoing concern, but it doesn't scare me to death," he says. "In my division alone, I'd like to have another thousand employees if I could have them."

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