Profits of Doom

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

As for Wall Street, Welty says few analysts are fixated on Y2K because "it's a negative story for the investment community. It doesn't generate revenue for them. Wall Street is full of eternal optimists, and this is a downer."

But Welty and Ollman both believe that external forces will drive companies to get cracking, providing a blizzard of contracts for Ciber and other companies positioned to cash in on the Y2K boom. SEC rules will require companies to tell their shareholders what they're doing about the bug. Banks will start looking at the Y2K situation in loan evaluations. Major manufacturers will follow the lead of the Big Three automakers, who recently sent a joint letter to thousands of suppliers advising them that if they want to keep their customers, they'd better be "Y2K compliant" when the big 00 rolls around.

Hovering over the scene is one more incentive: a litigation time bomb. Lawyers are already salivating over the prospect of shareholder lawsuits against companies whose stock plunges because of a Y2K problem. (A few Y2K-related suits have already been filed, and some states are scrambling to draft legislation immunizing government agencies from such actions.) Who will be held responsible? The board of directors? Software vendors who peddle stuff that has only two-digit date fields? Companies that promise quick fixes and then don't complete the work on time?

"Personally," says Welty, "I wish I could invest in law firms."

Eleven years ago, Tom Geimer took over an almost worthless company with the aim of salvaging what he could for shareholders. Since that day, anyone lucky enough to hang on to the stock has had reason to toast Geimer--and the coming millennium--about four thousand times.

That's roughly the percentage increase in the value of stock in Geimer's company, Accelr8, over the past two years, thanks in part to its Y2K business.

Accelr8 started out as a company called Hydroseek, a penny-stock venture engaged in buying and selling water rights in Colorado. The business went belly-up in the late-1980s real estate bust, and the company's founders bowed out, leaving behind a shell corporation with little capital and no prospects. Geimer, who ran his own securities firm, had been the stock's underwriter.

"I felt responsible for the shareholders who'd bought stock and then had management abandon them," he recalls. "I took it upon myself to find another business to put into that shell and rebuild the company."

Geimer took the company out of its dry hole and into the computer business, focusing on products for Digital Equipment Corporation's VAX/VMS systems--aging midrange computers favored by the military, government agencies and many large manufacturers. His first venture into product development was an abysmal failure; three months after Accelr8 embarked on an accelerator board that would make a VAX run faster, another company announced a Unix-based workstation that was ten times more powerful than Accelr8's product--and only 50 percent more expensive. It dawned on Geimer that the future lay not in hardware, but in coming up with ways that VAX users could "migrate" their data and applications to newer and speedier machines without having to rewrite all their software.

For several years, Accelr8 was basically a tool company, hawking migration products to the VAX market. Then business abruptly took off. After a stock split, the company opened 1996 trading at 50 cents a share; by year's end, it closed at $19.56--and Geimer, who controlled options for 1.2 million shares of stock, was a very happy fellow.

Geimer attributes the exponential growth to two key events. The first was the company's 1994 decision to offer consulting services as well as tools, a move that boosted product sales and landed Accelr8 several contracts for big migration projects from clients such as Union Carbide, Procter & Gamble, Kellogg's and the U.S. Army. The second was Geimer's trip to a conference in Salt Lake City in 1996, where he heard a Department of Defense official talk about the military's efforts to get a handle on its Y2K problems.

As soon as he returned to Denver, Geimer says, "I gathered all our technical guys and asked, 'What does the Year 2000 mean to us?' The initial thought was that it didn't mean anything because the VAX/VMS operating system claims to be Year 2000 compliant. But then you ask, 'What about the applications that are running on it?' That's where the opportunity was, because there were 7,000 applications sold to those users."

While virtually everyone else was worrying about IBM mainframes, Accelr8 was uniquely positioned to take advantage of the Y2K software problems in the VAX market. It was a niche market, sure, but what a niche--more than 400,000 hulking dinosaurs running a melange of programs written in different languages. The company had already developed an in-house tool that could quickly scan thousands of lines of computer code and assess the degree of difficulty in performing a migration project; with a little bit of tweaking, the scanner could be used to seek out date fields and evaluate Y2K problems.

Late in the summer of 1996, Acceler8 rolled out its first version of a Y2K scanner. Subsequent refinements have produced a sophisticated tool set known as Navig8 2000 that allows the user to perform a quick system inventory and identify potential date problems in any of eight programming languages. The product can't automatically fix Y2K glitches--those still require a programmer at the helm--but Geimer contends that it can save a company countless months of toil and considerable cash.

« Previous Page
Next Page »
My Voice Nation Help