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Quaker Fabric (QFAB) stock shed 42.7 percent of its value after the company announced its earnings for the second half were likely to fall significantly below analysts' estimates due to problems related to Year-2000 compliance.

Quaker shares lost 3-27/32 to 5-5/32 after the company forecast third- and fourth-quarter revenue would be a respective 15 and 10 percent below Wall Street estimates.

-- Scott Johnson (, September 25, 1998


uh folks, do you think this might be what wakes up the unaware? There will be a lot more of this soon. We might not have as much time to prepare as previously thought.

-- areseejay (, September 25, 1998.

No, I think that if any lesson is learned here, it's "Keep quiet about our company's Y2K expenditures".

-- Steve Hartsman (, September 25, 1998.

you are right, i didn't look at this from a companys' point of view.

-- areseejay (, September 25, 1998.

Actually, I think the first impression was correct. This is the tip of the iceberg.

It's my understanding that under new SEC guidelines for disclosure, a company MUST truthfully disclose the same kind of information that Quaker Fabric disclosed.

We aint seen nothin' y

-- Michael Taylor (, September 26, 1998.

one of the favorite slogans of World War II -- has become the guiding principle of corporations in War Y2K --

"Loose Lips Sink Ships"

-- John Howard (Greenville, NC) (, September 26, 1998.

We're going to start seeing more of these reports of Y2K-impacted earnings -- numerous and soon, too, as the end-of-quarter reports come out.

Looks like Quaker Fabric had particularly bad problems. Note the CNNfn sentence about QFAB's lower 1Q and 2Q earnings (on higher 1Q/2Q sales) because of operating inefficiencies ... hmmmm ...

Forecast: DJIA will drop below 6000 by end of next month. Yes, that's a _25% decline_ between where it closed yesterday, September 25 and where it will close on Friday, October 30. I am not kidding. Do not be misled by a possible modest rally to DJIA 8300-8400 next week -- picture a dive off a high springboard --> up a little, then down a lot. There might not be any particular spectacularly big one-day drop -- down 25% in 25 trading days is only down about 1% per day, compounded daily, on average.

Smaller cap stocks (e.g., Russell 2000) will decline by smaller percentages because they've already dropped lots more from their highs than the blue chips.

Prudence pays. Don't drown trying to swim against the tide.

-- No Spam Please, I'm Y2Kute (, September 26, 1998.

Maybe y2k related problem is just the landscapegoat. See:

-- O (, September 26, 1998.

For those who haven't seen the above link, it's a report that a class action suit has been filed against Quaker Fabrics on behalf of its shareholders. Quaker Fabrics didn't mention Y2K in its June report, in June it wasn't exactly news that the milennium was going to change, therefore the June report was fraudulent - so the logic goes. There's a growing tendency for a drop in share price to be equated with mismanagement by a corporation's directors - lawsuits are almost automatic in these situations.

It's hard to imagine a more powerful disincentive to full Y2K disclosure by any corporation. Don't expect anyone to lay it on the line.

-- Ned (, September 26, 1998.

Seems to me that lawsuits might be also be a powerful incentive to release information about Y2K problems, at least in a "regulated" manner. By keeping mum, I'd think companies would only be looking to get hammered after a major failure on or near 1/1/2000.

-- Mike (, September 26, 1998.

If I were a CEO in that situation, I might reason that: if I make a truthful Y2K disclosure now, I'm sure to get sued, and I'm not going to have much company. However, if I keep quiet now and TSHTF in 2000, everyone will be in the same boat and there's sure to be legislation for relief of liability - otherwise everyone will be bankrupt and the country will cease to function. If it hasn't ceased to function anyway, in which case the liability issue will be moot.

-- Ned (, September 26, 1998.

If I were a CEO I'd be quiet and hope it got fixed by 2000 avoiding both lawsuit and loss on the market.


-- Vic (, September 27, 1998.

Vic, I think you hit the nail on the head there. For the most part, they will keep quiet. They'll hope against all hope that somehow they'll get compliant in time. Plus you have to expect that some of them will fly the coop to offshore tax havens before TSHTF, somewhere where the shareholders can't get them.

-- Craig (, September 27, 1998.

Regarding (dis)incentives for truthful Y2K disclosures:

1. Some companies may be _planning_ to go out of business at the end of 1999 then reincorporate as a new business entity in 2000, one that does not have legal liability for the mess left by the former company.

2. Some companies have consciously adopted a "fix on failure" policy. Since they're going to wait until failures occur before fixing Y2K bugs, they can quite truthfully report that their current Y2K spending is low and Y2K remediation progress on schedule. They're gambling that their Y2K failures will not sink them, that they can patch themselves up fast enough to keep afloat. If they're right, they'll have saved a bunch of time and money.

3. Truthful Y2K disclosures now give your less-forthcoming competitors valuable information to use against you.

4. There is still denial and disbelieve at high levels of some corporations.

-- No Spam Please, I'm Y2Kute (, September 29, 1998.

Regarding my earlier "Forecast: DJIA will drop below 6000 by end of next month."

Though there are four trading days left in October, it looks pretty certain that my forecast will have been very WRONG. That's good news for most folks, I hope.

-- No Spam Please, I'm A Bad Market Forecaster (, October 26, 1998.

Let's hope more of us are equally wrong .....

-- Robert A. Cook, P.E. (, October 26, 1998.

Isn't 27th October the day of the crash of 1987, also the Great Gale in S. England (destroyed most of the large trees).

-- Richard Dale (, October 27, 1998.

Here's a tidbit which may relate to the discussion. I was checking the stockmarket yesterday and noticed the following article (it'll be gone soon, so I'm pasting the whole thing here): News Center

Market Wrap: Monday, Oct. 26 Trading on the New York Stock exchange was halted for an hour this afternoon after traders reported equipment problems. This was the second trading halt at a stock exchange today. This morning, options traders at the Pacific Exchange in San Francisco were forced to clear the floor after a fire alarm went off. The DJIA(sm) initially rallied following the resumption of trading, but quickly slipped into negative territory as sell programs took advantage of the gains. The DJIA(sm) finished the session down 20 to 8432. Small-caps and tech stocks however, were able to maintain their gains despite the decline in the DJIA(sm). The Russell 2000 Index of small-cap stocks closed up 5 to 372, finishing near its session high. The NASDAQ was up 31 to 1724, benefiting from a strong performance from the Internet sector and Dell.

Closer to home, the electricity in my area (Northern Utah) has been somewhat unreliable of late, with a short outage nearly every other day. About ten days ago the telephones in a large area in south Salt Lake City were down for several hours, radio news reported that it was due to a "computer problem". I was not able to find any additional information in the newspaper.

So I wonder: fixes or failures? Or both?

-- Max Dixon (Ogden, Utah USA) (, October 27, 1998.


fix failures, probably.

-- Larry (, October 28, 1998.

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