CONFERENCE CALLS

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FOOL PLATE SPECIAL

The Year 2000

The numbers are pretty startling when you first hear them. $60 billion for the federal government, $30 million for many states and a total of $300 billion to be spent by the year 2000 -- all because a few short-sighted programmers neglected to build their systems for eternity. It's called the millennium problem and it needs to be fixed -- the question for us as investors is whether or not this large-scale computer programming issue equals any kind of investment opportunity.

What's the problem, again? When a computer sees the numbers 00 in the date section of a data entry, it automatically assumes 1900. In four years, this will be a major problem, as it will be the year 2000 -- not 1900. Apparently, many legacy systems were designed to only use two digits for the year in order to conserve space and minimize memory requirements. So now hundreds of banks, government agencies and assorted other firms require significant programming attention in order to rewrite the offending code, line by line.

Does anyone stand to benefit from this surge in computer consulting business? A number of firms like VIASOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VIAS)") else Response.Write("(Nasdaq: VIAS)") end if %>, COMPUTER HORIZONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHRZ)") else Response.Write("(Nasdaq: CHRZ)") end if %> and DATA DIMENSIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DDIM)") else Response.Write("(Nasdaq: DDIM)") end if %>. Other plain-vanilla computer consulting firms like CIBER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIBR)") else Response.Write("(Nasdaq: CIBR)") end if %>, KEANE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: KEA)") else Response.Write("(AMEX: KEA)") end if %>, COMPUTER TASK GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TSK)") else Response.Write("(NYSE: TSK)") end if %> and ANALYSTS INTL. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANLY)") else Response.Write("(Nasdaq: ANLY)") end if %> will also see upticks in their business -- as the fix for this is not very complicated. You just need to get a reasonably-intelligent programmer to move through line by line, fixing each specific line of code.

If this is the case, why are names like Viasoft and Data Dimensions trading at such extreme multiples? These companies have set themselves up to be the name brands in legacy systems and conceivably will yield the highest benefits. However, with consulting firms like ELECTRONIC DATA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EDS)") else Response.Write("(NYSE: EDS)") end if %> and IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> hanging out there eager and able to take the business, they only deserve premium multiples if they have developed intelligent software agents to go through the code and reprogram it automatically. Otherwise, the big guys and hundreds of smaller guys will all be competing for a pie that will be pretty much eaten by 2002. If you are considering an investment in legacy systems, this is the critical data point to assess. Ask yourself -- is this just a regular consulting firm dressing itself up in year-2000 clothes or does it really have something special that will bring it a lot of business?

UPS

Jumping $3 1/8 to $18 3/4, VENTRITEX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VNTX)") else Response.Write("(Nasdaq: VNTX)") end if %> received approval from the FDA to distribute its Contour implantable defibrillators.

Year-2000 problem-solver DATA DIMENSIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DDIM)") else Response.Write("(Nasdaq: DDIM)") end if %> continues its strength, moving $3 1/2 to $42 on dissemination of the news of its contract with MCI COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %>.

Shares of BUSINESS OBJECTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOBJY)") else Response.Write("(Nasdaq: BOBJY)") end if %>, up $1 1/8 to $14 3/8, have been bouncing around recently on earnings worries. Those worries have had stronger sway over the stock than this week's announcements of deals with ORACLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> and TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %>.

In the same sector of the software market, OBJECT DESIGN INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ODIS)") else Response.Write("(Nasdaq: ODIS)") end if %> is up $1 3/8 to $17 1/8 on product announcements this week. The company went public this summer and has appreciated nearly 150% in the last 90 days.

MAGELLAN HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: MGL)") else Response.Write("(AMEX: MGL)") end if %> is up $1 3/8 to $20 3/8 after announcing yesterday that it had completed its Dutch auction, or tender offer, at $18 3/8 a share. The success of the auction has shrunk that shares outstanding to 29 million.

Marine construction firm J. RAY MCDERMOTT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JRM)") else Response.Write("(NYSE: JRM)") end if %> is up $2 1/8 to $28 1/8. The company announced late Wednesday afternoon that it had been awarded a $140 million Gulf Of Mexico contract.

Moving up $2 5/8 to $16 1/8, OPTICAL CABLE CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OCCF)") else Response.Write("(Nasdaq: OCCF)") end if %> announced today that it has received an order from Chrysler to supply 63,000 feet of 24-fiber, multi-mode fiber optic cable.

GENERAL MOTORS 'H'/HUGHES ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GMH)") else Response.Write("(NYSE: GMH)") end if %> is up $3 1/2 to $61 1/4 as investors are taking in the details of the merger of Hughes' satellite operations with those of PANAMSAT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPOT)") else Response.Write("(Nasdaq: SPOT)") end if %>.

DOWNS

SOUTHERN UNION COMPANY (Nasdq: SUG), which opened Monday at $20 1/2 and had an unexplained run-up to yesterday's close of $27 1/8, dropped $1 3/4 to $25 3/8 on no news we could find -- presumably on profit-taking. The natural gas distributor does have a lawsuit pending to block the merger of two of its rivals.

Shares of ELECTROGLAS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGLS)") else Response.Write("(Nasdaq: EGLS)") end if %> were dropped $7/8 to $13 after the company gave guidance that it would miss third quarter consensus estimates of $0.31 a share by at least $0.13. The company makes automatic wafer probing equipment used in the semiconductor industry.

RENTAL SERVICE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RSVC)") else Response.Write("(Nasdaq: RSVC)") end if %>, an Arizona-based equipment rental concern, came public today priced in the mid-teens, rose to $22, and is currently down $1 to $21. Such are the volatile ways of initial public offerings (IPOs).

VERSANT OBJECT TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VSNT)") else Response.Write("(Nasdaq: VSNT)") end if %> continued yesterday's plunge, falling $1 7/8 to $23 3/4. The company develops object database management systems (ODBMS), and before yesterday's fall, had seen its stock rise 60% since the beginning of the week.

Consumer services provider TELETECH HOLDINGS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TTEC)") else Response.Write("(Nasdaq: TTEC)") end if %> announced that it has won a big contract to manage the first of six planned call centers for the U.S. Postal Service, but plunged $4 to $34. The stock has traded as high as $40 today.

FOOL PORTFOLIO STOCKS

    FOOL PORTFOLIO               BORING PORTFOLIO
AOL  up $1 3/4 to $34 7/8     BGP  up $1/4 to $35 7/8
CHV  up $3/8 to $62 1/4       CSL  down $3/8 to $53 1/4
COMS  unch. at $56 1/8        CSCO  down $1/8 to $59 7/8
GM  up $1/8 to $48 3/4        GNT  up $3/4 to $36 3/4
IOMG  up $1 1/4 to $19 1/8    OXHP  down $5/8 to $47
KLAC  up $5/16 to $21 5/16    PMSI  up $1/16 to $13 11/16
MMM  down $3/4 to $69 3/4     SHAW  up $5/8 to $31 5/8
T  down $1/4 to $56 7/8       SPY  unch. at $68 3/8
                              TXI  down $5/8 to $62