http://www.usatoday.com/life/cyber/tech/ctg388.htm

Looks like the folks here on this forum may not be the ones to "eat crow" after all....

10/11/99- Updated 01:14 PM ET

Corporate Y2K fears rise Companies are less optimistic about possible glitches

By M. J. Zuckerman, USA TODAY

Corporate America is exhibiting nervous ticks and twitches as the year 2000 nears.

Related stories: A company-by-company list of expected Y2K expenses A worst-case Y2K scenario Special report: Millennium bug countdown For almost two years, companies made mostly rosy predictions about their ability to handle the Y2K computer glitch. But now, some of the nation's largest corporations are expressing reservations in quarterly Y2K status reports filed with the Securities and Exchange Commission.

There is near-universal acknowledgement that no one can identify every weakness that could cripple a computer system and, perhaps, a company, according to a USA TODAY review of SEC filings.

The biggest fear: Problems that by themselves would be minor could trigger a domino effect with serious consequences.

EDS, for example, says it is ready. But, the information technology firm adds, "There is a significant likelihood that non-EDS related Y2K problems will cause interruptions of the 'extended' networks utilized by EDS and other third parties."

Simply put: A local phone line fails, and EDS starts losing clients.

That could be an expensive disconnect. General Motors is committed to paying EDS a $62 million bonus if the auto giant makes it past April 1 without any significant business disruption and financial loss due to Y2K. That's on top of $204 million GM is paying EDS for Y2K services.

The Y2K problem is so simple that it would be laughable if it weren't so pervasive. Arcane computer code -- in an unknown number of computer systems, software and chips -- uses two digits to denote years. So the day after Dec. 31 could be read as Jan. 1, 1900, skewing date-sensitive functions.

While no one predicts devastating system failures, several companies draw apocalyptic pictures. The SEC requires firms to provide worst-case scenarios. Such disclosures are meant to warn investors and provide some defense against liability lawsuits if the worst comes to pass.

"These filings are neither basis for panic nor reason to be reassured," says Steve Hock, of Triaxsys Research, a consulting firm that analyzed SEC filings.

Common themes

Hock identifies five trends in the latest SEC disclosures, which reflect work completed through June 30:

Domino effect. Companies are recognizing that there are likely to be failures resulting from the complex relationships of systems. Mobil Oil, for instance, says the failure of one or more systems that individually are minor could "trigger a cascade of other failures for year 2000 reasons, the combination of which could have a material adverse effect on Mobil's operations, liquidity and/or financial condition."

Embedded systems. These are microchips contained in millions, perhaps billions, of products that may have some time-sensitive qualities. If they fail, they could trigger the domino effect.

Enron, one of the world's largest suppliers of energy, admits that it, its suppliers and other firms on which it depends won't be able to find and fix all its embedded chips.

The company warns: "Some of the embedded chips that fail to operate or that produce anomalous results may create system disruptions or failures. Some of these disruptions or failures may spread from the systems in which they are located to other systems in a cascade. These cascading failures may have adverse effects upon Enron's ability to maintain safe operations and may also have adverse effects upon Enron's ability to serve its customers."

Supply-chain problems. The failure of a smaller provider to fix its Y2K problems could cripple a larger company. Philip Morris reports that it considers 700 of its 6,000 "key business partners" likely to suffer some Y2K failures.

Upshot: "The possible consequences of these disruptions include temporary plant closings, delays in the delivery of products, delays in the receipt of supplies, invoice and collection errors, and inventory and supply obsolescence. Depending on the number and severity of disruptions, it is possible that the business and its operating subsidiaries could be materially adversely affected."

Stockpiling. Pharmaceutical giant Eli Lilly, for example, "has made the decision to increase inventories of certain key products in order to have additional finished stock in the event excessive consumer purchasing occurs in late 1999." Such stockpiling by companies could skew economic statistics and create the illusion of rapid economic growth.

Replacing old systems. Hock says about 25% of companies are installing new systems rather than upgrading old ones. Those firms are "at terrible risk," he says. "Historically, 80% of technology projects that ultimately fail to make deadline are reported to be on time and trouble free just three months prior to" deadline.

Reebok International has been overhauling its information technology worldwide and told the SEC it was relying on that conversion to protect it from Y2K.

But in its most recent SEC filing, Reebok says that because of technical difficulties, it has decided to delay full implementation until after January 2000. The firm will address Y2K by modifying its existing software, a project it expects to have done this fall.

But, Reebok warns, "There can be no assurance that its contingency plans will be sufficient to mitigate the impact of any potential failures."

Time's running out

Many companies also are saying there's more work than time remaining before the new year. The nation's 1,000 biggest companies, as ranked by Fortune magazine, report spending 77% of what they say it's going to cost to make them Y2K ready, Triaxsys says.

"I'm not bothered by the company that reports it's 97% complete," says Hock. "But there are some chemical companies, for instance, that report spending as little as 33% of their Y2K budgets. Those are the ones I worry about."

Collectively, the Fortune 1,000 expect to spend at least $55 billion to correct Y2K problems, Triaxsys found. Citigroup tops the list with $950 million budgeted. Wal-Mart, the nation's third-biggest company, is spending $27 million. Only three of the 100 biggest companies reported spending less. The difference is the extent to which the banking and retail industries rely on computers. For Citigroup, a Y2K failure would threaten core operations; for Wal-Mart, it would be an inconvenience.

The USA's total Y2K tab -- including businesses; federal, state and local governments; and individuals -- is expected to be about $200 billion, according to consultants.

"This is obviously the biggest management problem the world has ever seen," says John Koskinen, chairman of the President's Council on year 2000 Conversion.

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-- DavePrime (the-tv-guy@hotmail.com), October 12, 1999

Answers

Uhhh DEJA VUE All over again. PLEASE tell me it ain't groundhog day!!

Night Train

PS this happens to be a repeat thread of info from this AM. ("Cat's outa the bag..")

NT

-- jes a seein double footballer (nighttr@in.lane), October 12, 1999.

Sorry. Didn't see it. I'll go look at it now.

-- DavePrime (the-tv-guy@hotmail.com), October 12, 1999.

You mean Y2K may cause some serious problems?! WHY oh WHY didn't someone warn us of this 2 or three years ago when we could have prepared!!!! . . . . .

Well, I guess I better get another bag of rice!

-- winna (??@??.com), October 12, 1999.