Wall St. cools to year 2000 firms
Viasoft and its competitors, which offer software to help address the year 2000 bug, sees Wall Street cool to their stocks.
Viasoft and its competitors, which offer software to help companies rework their computer systems to handle the year 2000 bug, have seen Wall Street cool to their stocks.
Investors and analysts are concerned about the lack of a clear leader in this industry, and some question whether these stocks are overvalued. "There are so many solutions that there is oversaturation with no clear leader," said David Menlow, editor of IPO Financial Network.
Other analysts expressed similar views. "A lot of people jumped on the boat as Viasoft and Zitel were declared the winners," said Cruttenden Roth analyst Neil Cooper.
"You had a bunch of offerings with companies that had just come out of the woodwork," he added.
The millennium bug threat stems from computer systems using a two-digit format to show the year--making 1997, for example, simply 97. But at the turn of the century, many systems will interpret 00 as 1900 rather than 2000.
Analysts say the year 2000 problem is more significant than originally perceived. For example, an estimated six percent of companies' revenues will be earmarked for resolving the year 2000 problem between 1998 to 1999, said James Schmidtt of Westcountry Financial. He also added that only five to ten percent of companies have resolved the problem to date.
Nonetheless, companies like Viasoft recently have seen its stock take a tumble. Viasoft was trading at its 52-week high of 65-1/4 in January but closed on Friday at 32 a share.
Menlow said that Viasoft originally filed to have a secondary offering at $46 a share to raise additional funds for its operations. But the company's CEO, Steven Whiteman, said in a statement that the company has "sufficient working capital to meet the liquidity needs of its operations and planned growth for the foreseeable future."
"With the recent disappointing performance of the stock market generally, and technology stocks in particular, we do not believe that the planned offering is in the best interests of the company and its stockholders at this time," he added.
Other companies that have been hit include Zitel (ZITL), Accelr8 (ACLY), and TSR (TSRI).
Zitel traded at its 52-week high of 72-7/8 at the end of December but has since dropped to 33-3/4 at Friday's close.
TSR was trading at 50 at the end of December and closed Friday at 22. Accelr8 was trading at its high of 30-5/8 in January but closed at 14-1/2 today, down over 7 percent from Friday's close of 15-5/8.
Accelr8 announced today that its net income for the second quarter ending January 31 plunged to $49,706, or 1 cent a share, from $159,700 for the same period a year earlier. And revenue for the quarter also dropped 30.2 percent to $258,888 for the quarter, down from $371,028.
The company, however, remains optimistic. Accelr8 has diverted all its technical resources from consulting activities to year 2000 tool development projects since the company's initial public offering last November, company chairman Thomas Geimer said in a statement. He added the company has been working on several projects he expects will boost third- and fourth-quarter earnings.
Some analysts say that some of these stocks were overvalued due to the hype surrounding the millennium bug. Menlow said that investors flocked to year 2000 companies the same way that they flocked to Internet companies back in 1995, and that now is the time to stand back and see if those were good investments.
He added that even if someone pulled ahead with a viable solution to this bug, "I don't know that everyone would come flocking to that company."