New Year's Hangover: Fortunes of Vendors Vary

Predictably, the market for tools and services to fix date fields died when the clock struck midnight Dec. 31, 1999. But as the new year rolled in, many systems integrators that had previously focused on Y2K watched their stock prices soar to new highs as they repositioned their services. Tool vendors, however, haven't been so lucky.

Cognizant Technology Solutions Corp. watched its stock hit an all-time high of $121 Christmas week, just after the Teaneck, N.J.-based services firm announced a suite of integration services to aid in building Web applications. The stock price remained in the mid-90s into the new year.

William Sutherland, an analyst at Janney Montgomery Scott LLC in Philadelphia, said integrators like Keane Inc. and Computer Horizons Corp. leveraged their year 2000 contacts to perform more projects within information technology organizations.

"They never counted on Y2K being a multiyear opportunity," he said. "They looked at it as a way to get a bigger customer list, then went in with e-business services and other projects. The successful companies thought of Y2K as a project cycle, just like [enterprise resource planning], which goes up and goes down."

Bouncing Back

Boston-based Keane and Mountain Lakes, N.J.-based Computer Horizons rebounded with the new year. Both companies are focusing heavily on Web-development integration services.

But unlike their services counterparts, Y2K tool vendors have had a tougher time repositioning their products for e-commerce.

Phoenix-based Viasoft Inc., a Y2K mainstay with its OnMark2000 compliance-checking tool, announced e-Business Studio 1.0, a tool suite for adapting legacy applications for the Web, early last month. Yet that barely affected its stock value, which fluctuated less than a point during December and is down from its year high of $8.82 in August. Income was down 26% in the quarter ended Sept. 30 from the same quarter a year earlier.

Slumping Tool Makers

The stock of Fremont, Calif.-based Y2K tool vendor Zitel Corp. also continues to slump, but it gained ground from its year low of 63 cents in November. The announcement of Linux support and a new Web monitoring tool offering in mid-December propelled the stock to trade at $6.25 per share.

Y2K tool vendors still have a shot at marketing their asset and inventory management tools to Internet-focused companies, industry analyst Norbert Kriebel at Giga Information Group Inc. in Cambridge, Mass., said. "Out of Y2K comes a new alternative for inventory management," he said.

"You would never start a company without a financial ledger, but in the past, we haven't focused on an IT ledger, something that examines the well-being of the IT portfolio," he said.

But Sutherland said he's doubtful that Y2K tools vendors can make a comeback.

"I never bet on the license-fee side of Y2K because [those firms] don't have the same customer relationship in that business [as services firms]," he said.

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