Study shows U.S. firms not ready for Y2K
Despite widespread confidence that the new year will come and go without a hitch, a study claims that many large companies in vital U.S. industries are far from prepared for the millennium.
Companies in industries like telecommunications, pipelines, and airlines rank "low" or "below average" in their Y2K preparedness, based on a study of their publicly disclosed Y2K budgets and expenditures conducted by Weiss Ratings, a Florida-based provider of Y2K readiness ratings.
Although not intended to be an exact evaluation, the Weiss Y2K ratings are believed to provide an approximate indication of each company's relative progress.
Overall, among the 552 Fortune 1000 companies making complete disclosure on Y2K budgets and costs in their second quarter 1999 filings with the SEC, the aggregate budget estimate is $30.5 billion. But only $19.6 billion of those budgeted funds had been allocated to actual expenditures, according to the firm.
All other factors being equal, a company should have spent at least 70 percent of its budget by mid-year in order to qualify for a Weiss Y2K rating of "average" according to the firm.
"The primary reason for the survey is for investors to make investing decisions," Martin Weiss, chairman of Weiss Ratings, told CNET's News.com. "We don't know what the true impact to consumers will be."
In the Weiss Y2K rating scale, "low" and "below average" are considered unfavorable ratings, implying a warning to investors, but ratings of "average" and "high" are considered favorable, implying that the companies are on schedule for complete remediation at least by year-end.
In the telecommunications industry, 73.3 percent of the 19 rated companies were in one of these two categories, including MCI WorldCom, which was rated below average; Bell Atlantic, rated below average; and Comcast, rated low, according to the survey.
Among companies involved in oil, gas, and other pipelines, five of the six rated companies were given unfavorable marks, such as Dynegy, rated low, and El Paso Energy, rated below average.
Richard Baish, president of El Paso Electricity, disagrees with Weiss's survey results, finding fault with the methodology of the study. "All I can say is it is contrary to what we have done. It's faulty because we have expended a lot of money and resources since 1997 on Y2K and we do not expect have problems. Of course we will be tweaking this and that up until the midnight deadline, but all of our business critical systems are ready."
Even in the U.S. airline industry, supposedly further along in fixing its computer systems than its counterparts in most other countries, half of the eight firms got ratings of "low" or "below average." The largest among them were the parent company of United Airlines, Northwest Airlines, and Trans World Airlines, which all were rated below average.
Calls to several of the companies mentioned in the report were not returned.
A spokesperson from MCIWorldcom wouldn't respond directly to the survey, but said the company has met all SEC requirements on Y2K issues and has met all of its internal preparedness deadlines.
On the other end of the spectrum, industries boasting the highest percentage of companies with a favorable Weiss Y2K rating include banks and savings and loans, with 95.5 percent of them having above average ratings. Security brokers are at 80 percent; electric utilities are rated at 66.7 percent; and semiconductors and railroads are 100 percent above average.
Weiss said he isn't surprised by the negative ratings for some companies this close to the end of the century. "It's a mixed bag. You'll have to expect that that there will be one group of companies ahead of the pack, one group behind, and the majority of them somewhere in between."
Separately, Weiss also publishes financial safety ratings and Y2K readiness ratings on insurers, banks, and S&Ls.