From: MichaelP <[EMAIL PROTECTED]> To: "unlikely.suspects": ; Subject: Secondary effects resulting from y2k preparation? London TIMES January 11 1999 Efforts to tackle bug could end in bust BY CARL MORTISHED FEARS are growing that efforts by large companies to protect their businesses from the millennium bug could lead to a rapid boom followed by a bust at the turn of the century. Evidence is emerging of stockpiling in both raw materials and products as firms attempt to ringfence their operations from anticipated distribution and supply-chain failures caused by computer failures. The possibility of computer meltdown, known as the Year 2000 (Y2K) problem, is caused by the inability of older generation computer programmes and hardware to recognise dates in four digits. Billions of pounds are being spent to correct the problem but concern about panic buying is encouraging firms to stockpile. Drug companies are planning sharp increases in inventory to guarantee supplies of essential drugs, while just-in-time manufacturers in areas such as food and in the car industry are seeking guarantees from suppliers. The prospect of a sudden build-up in stocks is worrying investment analysts who believe that some companies have failed to alert investors to a potential problem. Bill O'Neill, economist at HSBC, the investment bank, reckons that defensive behaviour in anticipation of a "millennium bomb" will give a quick boost to the economy while at the same time depressing corporate profits in 1999. He said: "It will depress profits to the extent that firms need working capital to build up inventory." Evidence from Cap Gemini, the information technology group, suggests that firms are planning to stockpile and the trend is likely to worsen. According to its survey of 1,700 businesses in two countries, about a third overall were planning to increase inventories and as much as 38 per cent of US firms. Chris Webster of Cap Gemini said that the survey, undertaken last year, was about intentions. He expects the number to increase. "People have less confidence in their suppliers than in their own systems and many are building boxes around their organisations." The trend is evident among drug companies, such as SmithKline Beecham, Zeneca and Novartis. Virginia Pascoe, analyst at HSBC, said that she will be adjusting her forecasts for the sector to take account of the cost of increased inventories. "They are planning to build up stocks themselves because they do not want wholesalers to increase stocks." The drug industry is highly sensitive, particularly in the large US healthcare market, to price pressure from buyers. A build-up in stock by wholesalers could hand buyers a weapon that could boomerang back on manufacturers. Mr Webster sees a wider threat to the whole of industry if the trend picks up. "A mini-crash is a real risk." -- For MAI-not (un)subscription information, posting guidelines and links to other MAI sites please see http://mai.flora.org/
